China Jan-Feb oil demand falls 3.1 pct on yr as economy slows

China's implied oil demand fell 3.1 percent in the January-February period of this year from a year ago, as the economy of the world's second largest oil consumer slowed sharply.

China consumed roughly 9.98 million barrels per day (bpd) of oil in the first two months of the year, according to Reuters calculations based on preliminary government data released on Thursday and unrevised figures from a year earlier.

China's economy turned in a surprisingly weak performance in the first two months of the year, with growth in investment, retail sales and factory output all falling to multi-year lows.

"The economic and industrial data today showed no good signal," said an oil analyst with China International Capital Corp. "Apparently oil demand was affected by the slowing industrial activities."

The drop follows China's poorest fuel demand growth in more than two decades in 2013. Fuel use in China, a key driver for global oil markets rose just 1.6 percent last year, as softer economic growth sliced into demand for transportation and industrial fuels such as diesel.

China's implied oil demand is a combination of crude oil processed and net imports of refined products. It ignores inventory changes, which are rarely disclosed by the government.

China's daily crude throughput fell 1 percent from a year ago to 9.75 million bpd in the January-February period, data from the National Statistical Bureau showed, despite PetroChina and Sinochem Corp starting trial runs at two new refineries.

Weaker demand was also in part due to a 29 percent fall in net fuel imports from a year earlier to around 226,017 bpd in January and February, customs data showed, as oil firms raised exports of diesel and other fuels as domestic supplies outpaced local consumption.

Fu Chengyu, chairman of top Asian refiner Sinopec warned last week about a glut in China's refining capacity. Fu said China's refinery utilization ratio will drop to 67 percent in 2020, when Chinese refining capacity is forecast to be 18 million bpd.

Sinopec and PetroChina have held their refinery utilization ratios above 80 percent in recent years.