SYDNEY, Sept 12 (Askume) – China’s crude oil imports jumped again in August, reaching their highest level in a year, but the rise was mainly due to a previous price drop rather than a recovery in consumption.
The world’s largest crude oil importer imported 49.1 million tonnes of crude oil in August, equivalent to 11.56 million barrels per day, according to customs data released on September 10.
This is the highest monthly total since August last year and a significant increase from July’s 9.97 million barrels per day, which was the weakest monthly total in the last two years.
While 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 jump in August imports marks the start of a recovery in Chinese crude oil demand, or more likely is it a reflection of a general decline in oil prices with the arrival of cargoes in August.
The buying pattern of Chinese refiners is that they increase imports when they feel prices are at competitive levels, conversely, they reduce imports when they feel prices are rising too high or too fast;
Cargoes scheduled to arrive in August are likely to be arranged in May and June, when global crude oil prices were on the lower side.
Global benchmark Brent crude oil futures hit their highest level this year, at $92.18 a barrel, on April 12 before starting to fall to a low of $75.05 on August 5.
This means that Chinese refineries may be incentivized to buy more crude during this window, meaning imports are likely to be much stronger in August and September than in the first few months of the year.
However, Brent crude rose slightly after the August 5 low, hitting a high of $82.40 a barrel on August 12, and then remained in a tight range around $80 until the end of the month.
Since then, Brent crude oil prices fell sharply to $68.68 a barrel in trading on September 10, the lowest since December 21, due to global demand concerns, especially in China.
Are imports being boosted?
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 the arrival of cargoes in November, December or January.
China’s refineries are also happy to build inventory when prices are low and also reduce inventory when prices rise.
China does not disclose the amount of crude oil moving into or out of strategic and commercial reserves, but it can be estimated by subtracting the amount of crude oil processed from the total amount of crude oil imported and produced domestically.
Using this approach, China’s inventories rose by about 800,000 bpd in the first seven months of the year, and it would not be surprising if this pace accelerated in August, given strong imports and potential weakness in refinery rates.
Perhaps ironically, China is buying more oil as prices fall, just as the Organization of Petroleum Exporting Countries (OPEC) has 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.
Given that China’s crude oil imports in the first eight months of 2024 were 10.98 million barrels per day, down by about 390,000 barrels per day from 11.37 million barrels per day in the same period of 2023, the revised forecast may also be too optimistic.
To meet OPEC’s forecast, China’s crude oil imports must increase significantly in the fourth quarter, and while currently weak prices are likely to lead to an increase in imports, it would be a major surprise if imports increase significantly enough to meet OPEC’s expectations.
The views expressed in this article are those of the author, a Askume columnist.
The views expressed are solely 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.
