China's Sinopec Corp said its domestic fuel sales improved in the second quarter after a deep decline at the start of this year, but remained weaker than early estimates of oil demand.
Domestic sales of refined oil products by the top refiner in Asia fell 8.4 percent to 57.71 million tonnes in the first half of the year, it said. Sales fell by just 4.8 percent in the second quarter versus last year, Reuters calculations showed, compared with a 12.4-percent drop in the first quarter.
The data from Sinopec, which supplies half of the world's No. 2 oil market, offers a rare glimpse into real end-users fuel demand, stripping out the increasingly volatile effects of trade flows and irregularly reported commercial inventories.
While the improvement is in line with earlier remarks by company executives on the gradual recovery in fuel sales, it suggests that independent estimates based on implied consumption -- excluding inventory changes -- may be overestimating the pace of the recovery as stockpiles continue to swell.
While implied oil demand rose 6 percent in May over a year ago in its fastest growth since August 2008, Reuters calculations based on official trade and output data also showed almost nil growth over the first five months of the year -- a contrast to Sinopec's deep 8 percent decline.
Last week independent analyst Paul Ting estimated refined fuel demand rose by 3.1 percent in the first half of the year, after adjusting for inventory changes.
The major discrepancy is likely to be caused by stockpiles, which are not reported by the government or companies. Sinopec's sales data also excludes the effect of exports which had shot up in first five months over a year earlier.
Data from an industry association earlier this month showed combined gasoline, diesel and kerosene inventories rose in May and June after falling from record highs the previous months, suggesting that stepped-up refinery production was running ahead of domestic demand. [ID:nPEK366140]
Increasing fuel inventories and a pullback in retail prices from official ceilings may suggest near-term choppiness of demand, Paul Ting wrote in a note.
At least a part of Sinopec's increased production in the second quarter appears to have been triggered by market anticipation for retail pump price hikes, which kicked in on June 1 and June 30 with a total increase of some 15 percent.
Crude throughput rose 6.7 percent in the second quarter, Reuters calculations based on company data showed, recovering from a 3.27-percent fall in the first three months. First-half throughput up 1.82 percent over a year earlier.
Gasoline production surged 21 percent from a year earlier while diesel production declined 5.4 percent, the company said.
Fuel demand growth is likely to stay firm in June, given record crude runs and continued hefty imports last month, and most analysts expect further gains in the second half as the economy recovers and its export-oriented industries begin to consume more diesel fuel, which has been hit hardest.
The first-half decline was led mostly by a sharp sales drop in diesel in the first few months. But demand appears to have bottomed out and we expect the government stimulus plan to work a larger effect in the second half, said Yan Kefeng of Cambridge Energy Research Associates.
Very strong gasoline demand should help slow that decline, Yan said.
The trend was in line with developments in some other sectors such as the power market that saw an increase in both power generation and consumption in June, the first rise in a non-holiday month since October.
China's economy expanded 7.9 percent in the second quarter after growing 6.1 percent in the first quarter, reinforcing hopes the world's largest emerging economy is gaining speed toward a full recovery and aiding growth in other economies.
Sinopec, China's second-largest oil producer after PetroChina, pumped 149.12 million barrels of crude oil, up 1.18 percent, in the first six months, while gas production fell 1.12 percent, to 142.53 billion cubic feet.