2005, China's Refined Oil Market Demand Forecasting And Oil Response Research

According to the commitment of China to WTO, on December 11th, 2004, the retailing market of the finished oil was open, and the foreign oil dealers were allowed to set up the JV enterprises to be involved in the finished oil retail operation, till December 11th, 2006, our domestic wholesale market of the finished oil will be fully opened. At that time, the foreign companies will establish up the oil tank farms, oil quay, and sales network, which indicates that the foreign companies could be in the sale of their own produced finished oil, definitely forming up the tremendous impact onto CNPC and Sinopec, as the huge challenge to our two monopolistic oil tycoons.Over the past 10 years, the demand growth rate of the finished oil in China is almost keeping the same pace with the growth rate of the domestic economy growth, and the consumption of the finished oil was rising at the annual growth rate of 8.6 percent, ranking at the third position around the world. Based on the forecasting, under the background of stable economic growth in China, in the coming 10 years, the demand growth rate of the finished oil would be kept over 4.5%. In order to adapt to the demand growth of the finished oil, the yield of the finished oil will also be sharply increased.The demand growth rate of the finished oil in 2005 is forecasted as 4.34~4.6% by means of the Elasticity Coefficient methodology, and the annual growth rates of the gasoline, kerosene and diesel are respectively as 3%~3.4%, 5.7% and 5.2~5.6%. The marketing strategy for CNPC is analyzed on the basis of the demand/supply forecast in 2005 (without consideration of the small-scale refineries). In accordance with the production plan of Sinopec during the Tenth Five-Year-Plan, the yields of gasoline, kerosene and diesel of Sinopec in 2005 are respectively 23.88, 7.25 and 42.20 million MTs, in which the market shares of CNPC can be 21.88, 4.03 and 35.10 MTs, whereas, the planned yields of CNPC during the Tenth Five-Year-Plan Program are respectively as 21.88, 4.03 and 35.10 MTs; therefore, the surplus of the gasoline is 3.97 million MTs, the surplus of the kerosene is 1.53 MTs, and the shortage of the diesel is 7.10 million MTs. Furthermore, in consideration of the overseas imported 7 million metric tons of finished oil, the competition of the finished oil market will be getting fierce.On the finished oil market, if compared CNPC with domestic and overseas competitors, regardless of the production capacity or the sales radius, CNPC doesn't take up advantages. In order to be orientated by the market and focus on the profit, CNPC should be as the follows: the yield of the finished oil in the Northeast region should be greatly decreased, so as to decrease the loss caused by being out of the sales radius; meanwhile, the product architecture should be adjusted, to decrease the oil, increase the chemical products, decrease the gasoline, increase the diesel, and decrease the low-octane products and increase the high-octane products, as well as increase the high value-added products and characteristic products. In the western region, the key point is to adjust the petroleum flow to actively carry out the principle that the heavy oil is processed in the near place, and the light oil is processed near to the market, so as to decreased the transportation fee of the finished oil. The crude oil of the North China region should be process in local areas, so that the finished oil can be consumed also in the local areas, taking up the market share at the extreme extent. Generally speaking, the profit-earning radius should be focused, and the yield of the finished oil as well as the product structure should be adjusted in accordance with the demand on the market, to carry out the strategy of oil in North transporting to South, and oil in West transporting to East.