China had shied away from importing diesel for much of January and February, relying on stocks built in late 2004, but improving economic activity from late this week following Lunar New Year holidays would start to trim inventories, they said.

Farmers would start planting in the warm southern and eastern regions from April, while demand for transportation would rise along with strong economic growth forecast at 8.5 percent this year.

“I won’t be surprised to see China come out with a surprise big purchase. Shutdowns are one factor, China’s economic growth is another,” a China-based supplier said.

In the second quarter last year, China more than quadrupled diesel imports to 740,000 tons versus the same quarter of 2003 to meet a demand spike driven by use of thousands of private diesel power generators.

The jump, however, was partly due to a low base in the second quarter of 2003 as the SARS epidemic hit oil demand.

The agricultural sector used at least 395,000 barrels per day (bpd) of diesel last year, 17 percent of China’s total diesel demand of 2.3 million bpd, said Kang Wu, oil analyst at Hawaii-based East West Center.

Yan Kefeng, an analyst from the Cambridge Energy Research Associates, said nearly 70,000 megawatts of new generating capacities would come on-stream this year, helping to ease China’s power shortage.

Diesel demand had been pushed up last summer when China suffered its worst power shortage in decades.

(Shenzhen Daily February 18, 2005)