Crude Reality

- China demand slowing down in July and stays on 6+% demand growth trajectory "July 2010 total demand was 35.6 mn tones for the month. This is equivalent to 8.5 mn BOPD, up only 0.2 mn BOPD on July last year and down 0.5 mn BOPD on June 2010. YTD demand is up 12.4% on same period last year, while if we look at previous years' demand levels (Jan-July YTD) total demand is up around 6.5% CAGR relative to 2006, 2007 and 2008. This is equivalent to around 0.6x GDP growth rates in the same period. Diesel demand, IP and power demand are all less than 15% up y/y now and there are ever more indications of a slowdown in China. This is partially due to government action but data also look weaker now as we have much a more difficult comparison from June 2009. Diesel demand growth is now close to zero y/y, while gasoline still lingers only barely above zero. Even “Other” products categories are nearing zero growth y/y due to the slowdown in Chinese activity. China LNG imports have also come down from the record April month (1.2 mn tones), importing 1.05 mn tones of LNG in July, with average cost at US$5.6/mmBTU (down from US$7.40/mmBTU in May 2010)."

JPMorgan Asia Oil Gas 20100824

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