SYDNEY, Sept 12 (Askume) – China’s crude oil imports rose to a one-year high in August, but the rise was mainly driven by previously low oil prices rather than a recovery in consumption.
The world’s largest crude oil importer imported 49.1 million tonnes in August, equivalent to 11.56 million barrels per day, according to customs data released on September 10.
This was the highest monthly figure since August last year and a strong increase from 9.97 million bpd in July, which was the weakest monthly figure in nearly two years.
Although imports in August look strong, it is worth noting that they are still 7% lower than the same month in 2023, and imports in the first eight months of this year were 3.1% lower than the same period last year.
The question facing the market is whether the rise in imports in August marks the beginning of a recovery in China’s crude oil demand, or whether it could just be a reflection of lower oil prices come August.
The purchasing pattern of sugar refineries is that when they feel prices are at competitive levels, they increase imports, and conversely, when they feel prices are rising too high or too fast, they reduce imports.
Cargoes scheduled to arrive in August are likely to be scheduled for May and June, when global crude oil prices are falling.
Global benchmark Brent crude oil futures hit a fresh year-high of $92.18 a barrel on April 12 but fell to a low of $75.05 a barrel on August 5.
This means that Chinese refiners can buy more crude oil during this period, meaning that imports in August and September are likely to be much stronger than the first few months of the year.
However, Brent crude oil rose slightly after the low on August 5, reached a high of US$82.40 per barrel on August 12, and then fluctuated in a narrow range around US$80 per barrel until the end of the month.
Since then, demand concerns around the world, particularly in China, have caused Brent crude oil prices to fall sharply, dropping to $68.68 a barrel on September 10, the lowest since December 21.
Will imports increase?
The current weakness in global crude oil prices suggests that Chinese refiners may increase imports, and if they buy cargoes now, this increase will be reflected in arrivals in November, December or January.
Indeed, sugar refiners are happy to add inventories when prices are low and reduce them when prices rise.
China does not disclose its crude oil imports and exports from its strategic and commercial reserves, but it can be estimated by subtracting the amount of imported and domestically produced processed crude oil from the total available crude oil.
Using this approach, China added about 800,000 barrels per day of inventory in the first seven months of the year, and it would not be surprising if the pace of inventory build accelerates in August due to higher imports and potentially lower refinery throughput rates.
Perhaps a little ironically, as oil prices fall, China is buying more oil, just as the Organization of Petroleum Exporting Countries (OPEC) lowered its demand forecast for the world’s second-largest economy .
OPEC’s latest report, released on September 10, lowered its forecast for China’s demand growth for 2024 for the second consecutive month to 650,000 barrels per day, down from 700,000 barrels per day last month and 760,000 barrels per day the previous month.
Even the revised forecast is still too optimistic, as China’s crude oil imports in the first eight months of 2024 were 10.98 million barrels per day, a decrease of about 390,000 barrels per day from 11.37 million barrels per day in the same period in 2023.
China’s fourth quarter crude oil imports need to increase to meet OPEC’s forecast, and although imports may rise due to current weak prices, they will not increase by the volume needed to meet OPEC’s forecast.
The views expressed in this article are those of the author, a Askume columnist.
The views expressed are those of the author. They do not reflect the views of Askume News, which is committed to integrity, independence and non-partisanship in accordance with the principles of trust.
