IEA Tweaks China Calculation Method

By SIMON HALL

The International Energy Agency said Wednesday that it is changing the way it calculates China's oil demand but acknowledged even this new method won't be accurate?due to shortcomings in official Chinese data.

"Few oil market issues are more critical yet more elusive than getting Chinese demand right," the industrial countries' energy watchdog said in its latest monthly report, adding that assessing current and past Chinese oil use is more art than science.

China has accounted for roughly 10% of the world's oil consumption and 40% of global growth in oil use in recent years, it said. In 2013, China's estimated oil product demand will be 9.98 million barrels a day, up from 9.96 million barrels a day in 2012.

In the past, the IEA, like many others, calculated Chinese "apparent demand"?a proxy for consumption?as the sum of Chinese refinery output and net product imports, it said.

However, it is unclear whether data from China's National Bureau of Statistics on Chinese refinery output include only state-owned refineries or if this captured some of the independent refineries commonly referred to as "teapots," which are estimated to account for as much as a third of Chinese nominal refinery capacity.

Additionally, the absence of reliable Chinese refined oil stock data is an obvious shortcoming, the IEA said. While China has produced some data on oil stocks since 2006, in recent years the numbers have been limited to percentage changes, and haven't included volumes, it said.

It is also unclear whether the inventory data that is published includes oil products held by the smaller two of China's four main refining companies or stocks held by independent refiners, it said.

To better reflect Chinese demand, the IEA has adjusted its methodology to capture reported stock changes, it said.

Even so, percentage stock changes reported by the official Xinhua news agency only include inventories of gasoline, gasoil and jet-kerosene. They don't account for any changes in liquefied petroleum gas, naphtha or fuel oil stocks.

Despite the shortcomings in official data from China, other mainstream energy organizations include forecasts from the world's second-largest oil consumer in their reports.

Wednesday, for example, the U.S. Energy Information Administration predicted China's oil demand would grow 4.4% this year. The IEA has forecast the growth rate at 4.0%.

Write to Simon Hall at simon.hall@dowjones.com

Source: http://online.wsj.com/article/SB10001424127887324162304578301491173553504.html?mod=rss_about_china

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