China's  apparent  oil  demand  surged  more  than 4% year on year in November, the fastest 

pace  of  growth  in 15 months, buoyed  by a sharp expansion in manufacturing activity, which 

helped  to  drive  the  country's  appetite  for  gasoil to a year's high and LPG consumption to 

record levels. 

The surprise acceleration  in manufacturing to hit the highest level in a year lifted demand for 

goods  transport, pushing  up  gasoil consumption. LPG  demand was driven by consumption 

by  propane  dehydrogenation  plants. Together, it  more than offset a 5% year-on-year drop 

in apparent demand for gasoline. 

"The  positive   growth  momentum   should  continue  on  the  back of fiscal support. With the 

economy  having  just   emerged  out  of  deflation, and  with  the  recovery  still  looking quite 

uneven,  policy  support  should  remain  in  place  until  the  recovery  becomes  more broad-

based," HSBC said in a research note. 

The  4.1%  year-on-year growth in total  apparent oil demand to 11.44 million b/d in Novembe

r  was  the  second consecutive monthly increase since October when demand rose 1.1%, da

ta compiled by S&P Global Platts using official numbers showed. 

November  demand  was  also  up 2.8%  from October, and higher than the average of 11.07 

million b/d over the first 11 months. 

Manufacturing investment  grew  at the fastest pace in a year at 8.4% in November, with broa

d-based  recovery  becoming increasingly visible in heavy industries, machinery and auto, da

ta from the National Bureau of Statistics showed. 

Industrial  production  grew  6.2% year on year in November, compared with 6.1% in October. 

PMI  also  climbed  to 51.7  in November from 51.2 in October.All this improved the outlook fo

r oil demand. 

A  slight  decline  in  oil  product  stocks  also  supported  actual  demand.  Total  oil  product 

stocks -- gasoline,  gasoil  and  jet fuel/kerosene -- edged down 0.07% month on month at th

e end of November, data from state-owned news agency Xinhua showed. 

Beijing  does  not  release  official data on oil demand and stocks. Platts calculates apparent 

or  implied  oil  demand by taking into account official data on monthly throughput at Chinese 

refineries  and  net  product  imports. But   the  official  data  fails  to reflect some of the crud

e throughput increases from the new crude oil consumers, the independent refineries. 

GALLOPING GASOIL DEMAND 

November  apparent   demand  for  gasoil  rose  to  a 12-month  high  to 3.43  million b/d, up 

0.9%  from  October, although it fell 2% year on year. Gasoil  accounts for around 30% of th

e country's overall oil products demand. 

Transportation  accounts  for  nearly 70% of gasoil demand, while agriculture and constructi

on sectors account for the rest.

Gasoil  demand recovery  was also supported by a  draw in stocks for the fourth consecutiv

e month. Gasoil stocks  at  the end of November were 3.9%  lower month on month, followin

g decreases  of 2.88%, 12.81%  and 16.81% in the previous three months, respectively, da

ta from Xinhua showed. 

The high  apparent demand was also a result of lower supply from the blending pool, which 

pushed up production at refineries to make up for the loss. 

Blended barrels, with imported light cycle oil and domestic kerosene as the main componen

ts, are not included in gasoil apparent demand calculations because of the absence of offic

ial data. 

China's imports  of   light cycle  oi remained relatively low at 384,549 mt in November, comp

ared with  an  average  of 445,906 mt over July-September. Blending with 1 mt of LCO coul

d get  2-2.5 mt  of  off-spec  gasoil,  which  is  mainly  used  in  the  construction and fishing 

sectors. 

GASOLINE CONSUMPTION FALLS 

Apparent   demand for gasoline  fell 4.7%  year on year in November after a 5.2% increase 

in  October. It   was  3.3%  lower  from   the  previous  month. Gasoline stocks at the end of 

November edged up for the second consecutive month by 0.87% from October. 

However, market  sources said the actual fall in demand would probably not be that sharp if 

blended barrels were taken into consideration. 

No official data reflects the blended gasoline barrels. But sales of imported mixed aromatics, 

which are  used mainly as a blending material for gasoline, provide an indication of demand. 

Data  from  the  General  Administration  of  Customs  showed that China's imports of mixed 

aromatics  jumped 23.7%  month on month to 868,190 million mt, suggesting a rise in blendi

ng activity. 

The fall in  gasoline demand was  also capped by a 17% year-on-year rise in gasoline-fuele

d vehicle  sales in November, data  from  the China Association of Automobile Manufacturer

s showed. Sales  of  gasoline-guzzling  sport  utility vehicles surged 42% year on year. LPG, 

NAPHTHA DEMAND 

LPG demand  surged  to  a  historical high of 1.8 million b/d in November, up 38.5% year on 

year and 12.3%  month  on month. The  previous  high of 1.66 million b/d recorded in March 

last year. Over the first 11 months of 2016, demand for LPG averaged 1.55 million b/d. 

Market  sources  attributed  the  growth  to plentiful  volumes  imported to feed the country's 

propane  dehydrogenation  plants,  which   increased   their  run  rate significantly  to  meet 

incremental industrial demand. 

Seven  major  PDH  plants in China were estimated to have run at an average of 77% of the

ir   capacity  in  November, up  from  around 67% in October, a Platts survey showed earlier. 

In  addition, two  new  PDH   plants -- the   Hebei  Haiwei  and  Oriental Energy's Ningbo Fuji 

Petrochemical -- started operations, respectively, in October and November. 

As  a  result, propane  imports  in November jumped 95% year on year and 30% from Octob

er. 

Apparent  demand  for  naphtha in November fell 4.9% year on year but it was up 7.6% from 

October  at  980,000 b/d  in  November. It  was higher than the average of 964,000 b/d over

the first 11 months. 

China's  ethylene  production from naphtha-fed crackers edged down 1.4% from October an

d 0.5% year on year to 1.45 million mt in November. JET FUEL, FUEL OIL DEMAND 

Apparent  demand for jet fuel in November rose 29% year on year to 800,000 b/d, the highe

st in 21 months. Month on month, it rose 8.2%. 

Actual  consumption in November should be lower because of a month-on-month rise in stoc

ks of 9.89%, data from Xinhua showed. 

Latest  data  from  the Civil Aviation Administration of China showed that aviation traffic rose 

12.7% year  on year in October, although it slowed from the 14% growth in September. In th

e first 10 months, turnover increased 12.6% year on year. 

Apparent   demand  for  fuel  oil recovered to a five-month high of 687,000 b/d in November, 

rising 7.3% from October despite falling 1.2% year on year. 

Customs data showed that imports of bitumen blend -- which refers to heavy residual blends 

such as 380  CST fuel oil, bitumen or heavy gasoil -- surged 286% from October. The grade 

is used as feedstock by independent refineries. 

Consumption  of  bitumen  blend  at  Shandong, home of most of the independent refineries, 

rose 55% month on month in November. 

Imports of fuel oil  in November rose 6.1% month on month because of high demand from th

e bunkering sector.