The International Energy Agency's warning this week that China had been aggressively increasing its oil consumption came at a critical time when U.S. refineries are trying to maintain gasoline stockpiles in the run-up to summer.

Chinese (crude) demand rebounded sharply in November to a new record high of 6.72 million barrels per day, up from 6.35 million bpd in October, the Paris advisory agency said in its monthly report. This represents a year-on-year gain of nearly 16 percent.

The IEA predicted that China's crude consumption this year would be a healthy 5.7 percent over 2004, or 6.73 million barrels per day. Such a noticeable increase will conceivably mean that the open-market bidding for crude and crude futures will be more spirited, particularly with OPEC tightening its exports as of Jan. 1.

Overall world demand, the agency said, was projected at 82.4 million bpd for 2005, up from last year's forecast of 79.6 million bpd.

China represents a potent stimulus for the crude markets that have largely absorbed the bullishness brought on by continuing tension in Iraq and OPEC's 1-million-bpd supply trim, which was officially termed an elimination of the excess production over and above the cartel's official quotas of 27 million bpd.

China's booming economy, spawned largely by its increased exports to the United States, requires considerable higher amounts of fuel and China has been a net oil importer since 1993 with roughly half of its crude coming from the Middle East.

As the source of around 40 percent of world oil demand growth over the past four years, Chinese oil demand already is a very significant factor in world oil markets, the U.S. Energy Information Administration concluded in an analysis of China issued last summer.

The IEA said China's seemingly aggressive buying of crude could be an indication that the state-run oil companies were stockpiling oil in response to the recent slump in prices; however the agency also pointed out that Chinese refining activity had also increased, an indication that the crude wasn't simply sitting around in storage, but that it likely had end-users waiting for it to be turned into gasoline, diesel, ship's bunkers and residual oil used in power generation.

Throughputs at Sinopec and PetroChina refineries suddenly jumped to nearly 5.29 million bpd in November - a 250,000 bpd increase, the IEA report said.

Crude markets, however, have been responding in large extent to the supply situation in the United States, which is outlined in a pair of weekly inventory reports issued on Wednesdays by the EIA and the American Petroleum Institute.

The release of the EIA report was delayed until after the New York Mercantile Exchange closed this week because of the Martin Luther King Day holiday.

As a result, the New York Mercantile Exchange appeared listless Wednesday without the guidance of the data that regularly comes out at midday.

February crude lost 83 cents and settled at $47.55 per barrel, apparently on the lack of fire in heating oil, which had pushed prices sharply higher briefly on Monday based on forecasts of continuing cold weather in the Northeast.

Heating oil for February settled at $1.342 per gallon, down 1.2 cents on the day; February gasoline was up a fraction of a cent at $1.263 per gallon.

Some of the bearishness could conceivably be chalked up to recent media reports citing somewhat conflicting statements from individual OPEC ministers who noted that world demand could actually decrease in coming months and therefore they said they opposed increasing production levels at their Jan. 30 summit despite NYMEX prices that climbed to levels of $49.50 per barrel.

Crude oil prices are up 12 percent this year and OPEC will have a difficult time selling a cut in production, Phil Flynn of Alaron Trading predicted in an analysis Wednesday. We expect them to keep talking because they certainly don't want to see prices above $50 ahead of this meeting.

The EIA statistics released Wednesday amid Washington's inaugural preparations were actually bearish with the U.S. crude stockpile posting a 3.4-million-barrel increase to 292 million barrels, within the normal 5-year range for this time of year. The gasoline supply increased another 1.7 million barrels and was near the top of the average range.

Gasoline inventories have risen more than would typically be expected in the last few months as refiners have processed more crude oil than they typically would at this time of year in order to produce record amounts of distillate fuel in order to increase heating oil supplies, the EIA explained. With more crude oil being processed this winter, gasoline production has been relatively high, helping to build gasoline inventories.

The U.S. Energy Information Administration reported Wednesday that the average retail price of a gallon of regular had climbed 2.6 cents from the previous week to $1.819, more than 22 cents over the same period last year.

The brimming pool of gasoline should help consumers as summer approaches; however there will soon come a time when competition for crude from China will make it more expensive for U.S. refiners to maintain the high gasoline inventory levels that will make the summer easier on the wallets of motorists who don't want a repeat of last year's $2-per-gallon prices.

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