China's state-owned oil and gas giant CNPC has just added fuel to already strong optimism on oil markets by forecasting that crude oil demand in China will jump by 4.6 percent this year to 12 million barrels per day.
In imports, the news is even better for producers: CNPC sees net crude oil imports at 7.7 percent above 2017 levels, to 451 million metric tons, or about 9.06 million barrels per day. The forecast is based on estimated GDP expansion of 6.7 percent, slightly down from 6.9 percent in 2017.
Last year, China overtook the United States as the world's largest oil importer, with its dependency on imports reaching 67.4 percent. This year, this could climb further to 68.8 percent, even if there is a recovery in domestic production.
There is some bad news for refiners in the rest of Asia, however. CNPC's Economics and Technology Research Institute, which compiled the report, expects net oil product exports (export minus imports) this year to soar by almost a third to 46.8 million tons, with diesel exports shooting up by 47 percent thanks to higher export quotas.
The domestic Chinese market is in a glut of oil products, so higher quotas are very likely to be allowed to relieve it. However, this will undermine the margins of other Asian refiners who are already facing an uphill battle because of more expensive crude oil. Related: The Labor Shortage In The Shale Boom
Adding insult to injury, Chinese refiners have plans to add some 36 million metric tons in annual refining capacity, which equals about 723,000 bpd. The country's total, then, will reach 808 million tons annually, or 16.23 million barrels daily.
Most of this additional capacity will come from the teapots, whose role in China's energy market is becoming increasingly prominent. With this additional capacity, the independent refiners will come to account for a third of the country's refining capacity, which by 2020 will rise to 36 percent.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More