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China’s oil product imports may drop 23% this year

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Beijing, China — ESI-AFRICA.COM — 12 January 2011 – China’s net imports of oil products may fall 23% this year as the world’s fastest-growing economy slows and domestic refiners expand capacity, according to the research unit of China National Petroleum Corporation (CNPC).

“Net imports of products “’ including gasoline, diesel, kerosene and naphtha “’ may drop to 12.4Mt from 16Mt, said Gong Jinshuang, a senior engineer at the CNPC Research Institute of Economics and Technology, in a telephone interview from here.

China is shifting to a “prudent” monetary policy to rein in liquidity, combat accelerating inflation and limit the risk of asset bubbles damping energy consumption. The country’s oil demand growth may slow to 5.4% this year from an estimated 9.5% in 2010, data from the International Energy Agency shows.

“Diesel consumption will slow this year because of the cooling economy,” Gong said. “China’s refining capacity will also reduce the need for imports to some extent. Those capacities added late last year will ramp up output this year.”

The country’s refining capacity may expand by 400 000 barrels a day in 2011, a Bloomberg survey of five analysts last month showed. This would be a slowdown from an estimated increase of more than 630 000 barrels a day in 2010, according to a forecast by CNPC.

The drop in Chinese oil-product imports and refining capacity expansion may cut regional refining profits, Brynjar Eirik Bustnes, an oil analyst at JPMorgan Chase & Company, said by telephone from Hong Kong.

Asian diesel’s premium to crude oil, a measure of the profit from making the fuel, gained 16% this year to US$14.89 a barrel, boosted by Chinese demand in the fourth quarter.

Factories in China turned to diesel power generators after local governments limited electricity supplies to meet energy, saving targets last year. “Consumption of diesel will slow because the exceptional usage in the fourth quarter of last year will not be repeated,” according to Gong.