China’s imports of crude oil have been trending much lower in September than in the past four months, while the rest of Asia is also significantly slowing imports this month with demand still under pressure, IHS Markit said on Friday.
Crude oil discharged at Chinese ports in the last two weeks were below 8 million barrels per day (bpd), at levels similar to what China imported in March and April, Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime & Trade, at IHS Markit, said in an analysis.
So far in the third quarter, China’s crude oil imports have stayed strong, with high congestion at many major crude ports.
“But activity so far in September suggests that the world’s biggest importer of crude oil has been absorbing much less than a month ago,” Katsoulas said.
Earlier this year, China imported record volumes of crude oil in May and June, as the oil-hungry nation attempted to benefit from the low oil prices in April. The record-breaking crude oil imports supported oil prices through the late spring and summer when oil demand recovery in the rest of the world had just started and then wobbled amid concerns of a second COVID-19 wave.
Yet, China’s feast on low oil prices may now be over. In August, China was expected to have imported what could be the last of the bargain cargoes that refiners had snapped up in April.
Refiners in China are now “facing difficulties in absorbing these barrels and find buyers for refined products locally produced. This translates into significantly fewer fresh deals for crude oil, with shipments to China continuing to decline,” IHS Markit’s Katsoulas noted.
The rest of Asia is also importing much less crude oil than in the previous months, with South Korea, Malaysia, and Taiwan particularly weak compared to earlier this year, according to data from IHS Markit Commodities at Sea.
“Overall, oil imports to Asia have extended losses and could report the lowest figure this year, with volumes down between eight and 10% so far this month since August,” Katsoulas said, noting that India’s very slow demand recovery is also weighing on Asia’s crude oil imports and on oil prices.
By Charles Kennedy for Oilprice.com
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If China’s imports slowed slightly in September, it is to enable the numerous oil tanker waiting in Chinese ports to offload their crude shipments.
So IHS Markit shouldn’t make a song and a dance out of something explainable.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London