Driven by high refinery throughput, China likely drew crude oil from its commercial and strategic inventories in November, according to estimates from Reuters columnist Clyde Russell.
Chinese crude imports rebounded last month compared to October, but official figures of November’s refinery runs showed that processing rates were higher than China’s total availability of crude from domestic production and imports. Therefore, the world’s largest oil importer likely drew crude from its reserves to the tune of 370,000 barrels per day (bpd) in November, according to estimates by Russell based on data for November China has disclosed.
Chinese authorities do not report the volume of crude in its stockpiles, so its crude reserves, strategic and commercial, have always been the subject of speculation and guesstimates.
In November, China drew crude oil from its stockpiles for the sixth time in the past eight months, Reuters’ Russell has estimated.
Last month, Chinese crude imports jumped by 14.3 percent from October to average 10.17 million bpd in November. Imports plus domestic production combined averaged 14.14 million bpd. However, Chinese refiners processed 14.51 million bpd in November, up from 13.75 million bpd in October and up by 2.2 percent from November 2020, official data cited by Reuters showed on Wednesday.
The difference between crude availability and higher processing rates could be explained with China drawing crude from its reserves, Russell notes.
Between January and November, China is estimated to have added just 60,000 bpd to its crude stockpiles, either commercial or strategic. This is well below the massive building of crude reserves in recent years.
The pace of China’s crude inventory builds could be a major driver of global oil demand and oil prices in the coming months.
In the first quarter of 2022, China could see slowing crude imports. A combination of China’s policies to curb pollution in time for the Winter Olympics, its crackdown on illegal practices at independent refiners, and its zero-COVID policy with intermittent lockdowns are set to slow crude oil imports early next year, industry consultants have told Bloomberg.
By Tsvetana Paraskova for Oilprice.com
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Therefore, it is very likely that there was no crude withdrawal from China’s stockpiles at all and that the difference between crude availability and higher refinery processing rates could have been provided from higher Iranian crude imports.
I don’t also buy Reuters' suggestion of slowing Chinese crude imports in the first quarter of 2022. If the objective is to curb pollution in time for the Winter Olympics, wouldn’t it more logical for China to reduce coal consumption rather reduce oil imports?
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London