China's oil demand will rise by 3.4 percent in 2013 because of an improvement in economic growth prospects, Deutsche Bank said in a report on Dec 11.

According to the bank's China economists, GDP growth should return to its potential rate of about 8.5 percent in the second half of next year, bolstered by corporate investment and export acceleration.

The key downside risk in this scenario is worse-than-expected external demand, which could happen if the US were to go over the "fiscal cliff," the report showed.

US President Barack Obama and Congress are negotiating a budget deal to prevent the country from going over the fiscal cliff — coping with the simultaneous year-end expiration of several tax cuts and government programs. Many economists believe going over the fiscal cliff would plunge the US into another recession.

Deutsche Bank sees the main upside risk as being a better-than-expected fiscal revenue performance in China, which may allow stronger-than-expected government "capex" — spending for buying or upgrading physical assets.

While the oil demand growth forecasts look modest compared with recent years with the exception of 2012, it's worth noting that China will be the largest contributor to global oil demand on a growth basis, equal to 40 percent, according to the bank's forecasts.