China's diesel sales shrunk in June on slower economic growth and a rebound in oil prices, two state refining sources said on Monday, threatening to add to a global fuel glut as the country exports what it cannot absorb. Contraction in China's diesel demand, a barometer of its industrial activity, underlines challenges faced by the world's No 2 economy as growth drops to its slowest pace in 25 years. Oil prices that were down as much as 60 percent from a mid-2014 peak boosted China's fuel demand in the first four months of the year, but the sources said diesel sales slumped last month while gasoline demand slowed with lower car sales.
Analysts say a rout in Chinese equities could curb appetite for goods considered luxuries such as cars and reduce fuel use. "The recent drop in China's equity market is of concern and acts as a downside risk to our China oil demand outlook," said Suresh Sivanandam, principal analyst for refining and chemicals at Wood Mackenzie. Woodmac expects China's diesel use to grow just 0.1 percent in the second half this year versus 2.1 percent in the first half.