China's Oil Demand Contracts `Sharply' on Bank Crisis

By Wang Ying

Nov. 17 (Bloomberg) -- China National Petroleum Corp., the nation's biggest oil producer, said fuel demand has contracted ``sharply'' since September because of the global credit crisis.

``As the impact of the financial crisis on China's economy deepens, the company's operations have also been affected adversely,'' the Beijing-based parent of PetroChina Co. said in a statement on its Web site on Nov. 15. Stockpiles of crude oil and oil products have risen ``significantly,'' it said.

China, whose economy expanded at a slower pace for the fifth straight quarter between July and September, risks a ``drastic decline,'' the Finance Ministry said on Nov. 13. The nation's fuel demand growth may ease to an average 4 percent in the next two to three months, Gong Jinshuang, an engineer at China National's research unit, said in October.

China Petroleum & Chemical Corp., Asia's biggest oil refiner, will reduce crude processing by 10 percent in November from July's record as the nation's economic slowdown cuts fuel demand, company officials, who declined to be named because of internal rules, said last week.

The country's processing volume reached a record 30.3 million tons in July and fell to 29.8 million in October, according to customs data.

China will invest the equivalent of almost a fifth of its 2007 gross domestic product by the end of 2010 to spur growth in the fourth-largest economy as the world heads toward a recession, the State Council, or Cabinet, said on Nov. 9.

The 4 trillion yuan ($586 billion) economic stimulus package will provide ``enormous'' market opportunities for petrochemicals products, China Petrochemical Corp., parent of China Petroleum, said in its in-house newsletter today.

``As some overseas energy companies are keen to sell assets because of the banking crisis, domestic companies including China Petrochemical may benefit from potential takeovers,'' the company said.

-- Editor: Ang Bee Lin, John Viljoen.

To contact the reporter on this story: Wang Ying in Beijing at wang30@bloomberg.net;