China may help ease glut of crude

China’s demand for oil isn’t really slowing, it’s just changing, and this continued hunger for energy will help ease the oil glut, according to an analysis by the energy research firm Wood Mackenzie.

As the world’s secondlargest economy matures, it is increasingly supported by a growing middle class that is buying cars, traveling more frequently and consuming more gasoline. These trends are offsetting wavering demand for petroleum products by Chinese manufacturers, Wood Mackenzie said.

Household consumption of gasoline accounted for 90 percent of the country’s total oil demand growth this year, compared to less than half the demand growth five years ago, according to Wood Mackenzie. Meanwhile, demand growth for diesel and other fuels used by industrial buyers has dropped from more than half to 10 percent over the same period.

Chinese car retailers sold 21.1 million vehicles last year, and about 40 percent of them were gasguzzling SUVs and multipurpose vehicles. Wood Mackenzie estimates China’s oil demand will grow between 350,000 and 450,000 barrels a day this year, the same rate as 2011.

“Oil has maintained its growth,” said Ann-Louise Hittle, a Wood Mackenzie oil market analyst. “Despite the lower (economic) growth, there’s still a rising middle class. With increasing income, there’s a drive for personal mobility.”

China has had an outsized impact on global energy demand in recent years; crude prices fell to 12-year lows in February in part because of heightened fears that both China’s economy and demand for energy were weakening. If Wood Mackenzie’s assessment is correct, China’s growing demand for oil could help underpin the market’s return to normalcy.

Wood Mackenzie estimates that worldwide oil demand will exceed supply by the end of the year.

“We’ve got a rebalancing underway.” Hittle said.