China’s Oil Sector Softens as Imports Drop to Two-Year Low
China, the world’s largest oil importer, saw its imports fall to the lowest level in almost two years in July. However, the country continued to increase its stockpiles as refinery throughput declined for the fourth consecutive month.
In July, China added approximately 280,000 barrels per day (bpd) to its commercial or strategic inventories, based on official data calculations. This was a significant decrease from the previous month’s addition of 1.48 million bpd, but it still raises concerns considering the drop in crude oil imports to the lowest level since September 2022.
Although China does not disclose specific volumes of crude flowing in and out of its stockpiles, estimates can be made based on deducting processed crude from total available crude from imports and domestic output.
Refineries in China processed 59.06 million metric tons of crude in July, equivalent to about 13.91 million bpd. This marked a 6.1% decrease from the same period last year and was the lowest month in terms of barrels per day since October 2022.
With crude imports at 9.97 million bpd and domestic output at 4.22 million bpd, refineries had a total of 14.19 million bpd available. Subtracting the processed volume of 13.91 million bpd left a surplus of 280,000 bpd.
For the first seven months of the year, China’s surplus crude amounted to 800,000 bpd. Total oil imports from January to July were 10.89 million bpd, with domestic output at 4.28 million bpd, giving refiners a total of 15.17 million bpd available, of which they processed 14.37 million bpd.
The overall trend in China’s oil sector shows weakening imports and refinery processing, allowing stockpiles to continue growing. This puts China in a position to potentially reduce imports further if crude prices rise due to geopolitical tensions, demand growth, or supply tightening.
Analysts believe that escalating conflicts in the Middle East and Russia-Ukraine pose the greatest risk for oil price increases. While global demand remains subdued, OPEC+ is set to gradually increase output starting in October, with the possibility of revisiting this decision based on market conditions.
Forecasts for China’s oil demand growth vary, with OPEC estimating a rise of 700,000 bpd in 2024, while the IEA expects a more modest increase of 313,500 bpd. Given the current data, it remains uncertain whether China’s demand growth will meet these optimistic projections.
Overall, the softening of China’s oil sector has implications for global oil markets and could impact prices in the near future.
Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the opinions of Reuters.
