China's dependency on foreign crude will continue to increase this year despite the ongoing strife in major oil-producing nations like Iraq, a leading industry think tank said on Tuesday.
According to a report published by China National Petroleum Corp, the country's largest oil and gas producer, China is expected to import 298 million metric tons of crude this year, accounting for about 58.66 percent of the total crude consumption in the country.
The company's research institute estimated that full year crude demand in China would be around 508 million tons and domestic output around 210 million tons.
However, some analysts feel that the reliance on overseas crude supplies may be much higher than the levels estimated by CNPC.
Gao Jian, a crude analyst at domestic commodities consultancy Sublime China Information Co Ltd, said foreign crude may account for about 60 percent of China's total crude supplies this year because of the higher imports in the second half.
"International crude prices have been falling in the first half and are at relatively low levels now. It is a good time for Chinese companies to bolster crude imports for commercial or strategic reserves," he said. According to Gao, China's crude imports during the second half will register a 10 percent year-on-year growth.
China imported 129 million tons of crude during the first five months, up 10.9 percent year-on-year, according to CNPC. Foreign dependency for the first five months reached 59.87 percent.
The CNPC report, however, indicated that the ongoing strife in Iraq could have a potential impact on global crude supplies and oil prices.
Gao from Sublime, however, feels that the situation in Iraq will not imperil China's oil security, especially if the strife is restricted to northern Iraq.
Oil product demand in China grew at relatively low levels during the first six months of the year.
Diesel consumption in China has declined for 14 successive months due to the sluggish economy.
Diesel consumption in the manufacturing industry dropped 13.5 percent year-on-year.
The power sector's consumption of diesel declined by 16.8 percent year-on-year while the construction industry consumed 18.3 percent less diesel compared with the same period last year, according to data provided by the CNPC.
Gao said the main reason for the lower diesel consumption is the government's policy on eliminating outdated production capacity.
"Many companies in high-energy consuming industries were forced to shut down, which resulted in less diesel consumption," Gao said. "The diesel use is also falling due to the increasing natural gas consumption in the transportation sector."