China's oil demand fell by nearly six per cent year-on-year in the first quarter of 2009, Energy Intelligence (EI), the US-based energy advisory firm has said.

In a new update, EI said that Chinese net crude imports and domestic production averaged 7.39 million barrels per day. That is 5.6 per cent lower than the corresponding figure in 2009.

EI did not take into account stockpiles that the Chinese government has allegedly been building to make use of the low oil prices. The statistics exacerbates the widespread fear among analysts that oil demand, and therefore oil prices may seriously suffer this year because of low "actual demand".

"The Chinese have just raised oil prices [of petroleum products available at petrol pumps] meaning that they want to slowly scrap subsidies on oil. They are using this period to charge oil consumers that are practically linked prices prevailing in the market," said Robin Mills, a Dubai-based oil economist. Mills said that these steps by the Chinese government could further erode demand.

The report comes close on the heels of a warning by a top energy analyst that only the Middle Kingdom has the potential to raise sagged oil demand and deflated prices this year. Thomas Wallin, the President of EI had recently told Emirates Business that instead of the Chinese government stockpiling crude, actual demand for crude is essential to provide support to the fluctuating prices.

Mills said that making an analysis about China is difficult as there is no authentic federal source for data and several figures published by private bodies appear "misleading". EI in its report said that the key factor was crude imports, which slid 9 per cent year-on-year to 3.33 million bpd. Domestic output slid 0.6 per cnt to 3.75 million bpd, it added. State firms PetroChina and Sinopec indicated earlier this year they were likely to curb production in 2009 in response to lower domestic demand as a result of the global economic downturn, EI said. The advisory firm quoted figures from China Petroleum and Chemical Industry Association and said oil product stocks held by PetroChina and Sinopec fell nearly 15 per cent month-on-month in March to about 93 million barrels.

China reported a rise in demand for various commodities in first quarter of 2009. Every time a spur in demand for commodities like steel, copper, (even soya bean) and very recently gold market sentiments beefed up and prices rose. Official statistics released earlier this month indicate that Chinese automobile sales were up 10 per cent year-on-year in March at a record 772,000 units.

However, several other figures are not encouraging. "China's power output, a key barometer of industrial activity, fell 1.3 per cent year-on-year in March and is likely to drop four per cent this month," EI said.

Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.