China's high-octane appetite a hint of 2016 global oil demand

By Ron Bousso and Libby George

LONDON (Reuters) - China's thirst for high-octane gasoline is a bright spot for European refiners and offers a taste of global oil demand growth next year.

While U.S. gasoline demand traditionally eases after the peak summer driving season, Chinese buying of blending components used to upgrade gasoline to high-quality Euro V standard has remained strong, helping to power a recovery in cracks despite widespread expectations of a crash.

Tankers carrying around 1.4 million tonnes of mixed aromatics including reformate and toluene have been booked to load from the middle of September to early November out of Europe to China, according to shipping data and traders.

The flow is stronger than the first seven months of the year, when a total of around 3.5 million to 4 million tonnes of mixed aromatics were booked. More volumes are heading to China from the United States as well.

Gunvor booked nearly 500,000 tonnes on some nine 42,000- tonne and 90,000-tonne tankers between late September and the end of October. Shell booked around 250,000 tonnes, according to the data.

Though the exact reason for the strong pull from China at a moment when demand typically ebbs was unclear, traders said it could relate to importers stocking up before tax regime changes at the end of the year.

Chinese demand - in particular for summer grades that require high-quality blending components - is mirrored in India and the United States.

"Octane is the story, and it's going to be tight," said Robert Campbell, head of oil products research at Energy Aspects. "In Asia, this is an acute problem because the refineries are set up to make diesel."

The sustained gasoline buying contrasts with diesel, where a sharp rise in stocks in the last few months has pummelled margins and forced refineries in Asia to cut operating rates.

"They have a lot of problems meeting demand and staying in balance given the very slow pace of diesel demand growth in China," Campbell said of Chinese refineries. "Importing blendstocks allows them to make more gasoline while holding back diesel output."

China is home to the world's largest car market, which predominantly runs gasoline-fuelled engines, but traditionally diesel-focussed markets such as India are also turning to gasoline.

China alone has accounted for a quarter of global gasoline demand growth this year, according to a research note from Bank of America Merrill Lynch, expanding by 12 percent from 2014.

Both BAML and Campbell said the expansion showed little sign of slowing.

"China is adding millions of vehicles to its car fleet every year and 2016 will be no different even if the pace of car sales growth continues to slow given the relatively small used-car market in China," Campbell said.

MARGIN BOOST

India's gasoline demand has grown by 14 percent so far this year, and the United States, the world's top gasoline consumer, saw consumption rise at the fastest rate in the first six months of this year in 30 years.

"We expect gasoline demand to continue to feed off of low oil prices and see a strong 2016 driving season while the supply of summer gasoline component looks tight," BAML said.

Massive refineries in the Middle East and Asia have come online over the past year, but these units are geared towards making diesel - not the gasoline drivers worldwide need.

Additionally, U.S. refiners' use of lighter shale oil crudes, at the expense of octane-rich Nigerian crudes, means they are making a smaller proportion of the blending component needed for summer-grade gasoline.

"We see global demand growth for petroleum products outpacing additions of crude distillation units for the sixth consecutive year in 2016," BAML said.

(Editing by Susan Thomas)