Chinese Oil Demand Is 'Looking More Like A Vomiting Bear'

China's economy isn't growing as fast as it used to. The economy grew 6.7 percent in the second quarter, which falls short of 2015's 6.9 percent growth rate, which also happens to be its slowest pace of growth in a quarter century.

Nevertheless, the economy is still growing and many assume that Chinese oil demand to fuel growth is particularly strong. However, according to Bloomberg Gadfly's Liam Denning, China's oil demand is "looking more like a vomiting bear" than a "ravenous bull."

China And Oil

Denning pointed out that PetroChina Company Limited (ADR) (NYSE: PTR) reported on Wednesday its worst-ever first-half profit on Wednesday due to collapsing oil prices.

Granted, PetroChina isn't necessarily an outlier, as many oil companies across the world reported poor earnings. In this case, what is concerning is PetroChina's domestic fuel sales.

Denning continued that PetroChina and rival Sinopec Shanghai Petrochemical Co. (ADR) (NYSE: SHI) combine for more than half of the market in China. The two have seen their fuel sales "flat-lining" in 2014 at around 330 million tonnes (over a trailing four quarters) after four years of strong gains, and it is no coincidence fuel sales stopped growing at the beginning of the oil crash.

'Vomiting Bear...Drink Up'

"China's slowing demand is a headache particularly for refiners," the report noted. "Cheaper crude encourages refiners everywhere to process as much of the stuff as they can. But without adequate demand to take their output, that just means the crude-oil glut becomes a refined-product glut. And China is the perfect example of this."

Finally, Denning noted that China's next exports of gasoline, diesel and jet fuel hit a record high in July above 3.0 million tonnes. As such, when "China's appetite for fuel slackens, that just means more for everybody else. Drink up."

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