China’s crude imports stood at about 7.35 million barrels a day in July, the slowest import trend since January, Bloomberg reported on Monday, citing figures by the Chinese General Administration of Customs.
One of the reasons for the lower imports than in previous months was the slower demand by teapots, the independent refineries, as some have slowed with maintenance and others have filled up, Amy Sun, an analyst with ICIS China, told Bloomberg.
Another reason may be a fresh sign that the Chinese economy is slowing down, again.
In the first half of 2016, China’s crude oil imports rose 14.2 percent on the year, alongside import increases of other commodities such as iron ore and copper, with their prices remaining low, the customs administration said earlier this year.
The latest figures, however, showed that total Chinese imports in July had dropped 12.5 percent in U.S. dollars, which is a weaker start to the third quarter than analysts had expected. Total oil exports went down 4.4 percent last month as expressed in U.S. dollars. This means China posted its biggest trade surplus since January.
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This highlights again concerns over the pace with which the Chinese economy is growing.
Since January, China’s crude imports had been growing steadily, and in April, for example, the country imported 32.58 million metric tons of crude oil which equals 7.96 million barrels a day, up 3.2 percent from the previous month.
Still, signs that shrinking demand in China may hit oil prices globally – again -- had already started to appear early in July. And Monday’s trade figures do not help alleviate concerns that domestic demand is slowing down. Related: The Rumors Are Back! Oil Rallies On OPEC Chatter
“Government efforts to cut overcapacity could produce an even bigger hit to demand in the next few quarters,” Ma Xiaoping, an economist at HSBC in Beijing, told Reuters.
Even as Chinese teapot refinery demand for crude oil is cooling, it seems that China’s product glut has only increased over the last months. According to Reuters, China’s product exports have increased 46 percent from January to July.
A further increase in the high level of product exports is expected for Q3 as China’s independent teapot refineries are expected to continue to churn out gasoline and diesel at a high pace.
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A Beijing based trader quoted by Reuters said that he expects the growth in product exports to be ‘’strong throughout the next quarter’’ as refiners are tightening crude oil runs and increase exports to diminish the domestic product glut.
By Tsvetana Paraskova for Oilprice.com
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