China imported 9.05 million bpd of crude oil in September, for a total of 37.12 million tons, which was the highest rate of crude oil intake since May, Reuters reports, citing data from the Chinese customs administration. The amount was 10,000 bpd higher than the August import rate and was also the third monthly increase in a row as teapot refiners prepare for winter.
For the first nine months, crude oil imports into China rose 6 percent on the year to 8.98 million bpd, or a total of 336 million tons, which is in line with projections about Chinese oil demand, despite worry that demand would slow down this year because of a domestic fuel glut.
However, an oil trader told Reuters that refinery run rates have been on the rise last month, suggesting demand for fuels was improving. “With stable fuel demand, we have been scooping up crude oil, pushing up premiums of some crude grades,” the source said, but some local refiners have begun to worry about where oil prices are headed, expecting slimmer profit margins as a result.
Such a development would add to other problems teapots have been tackling recently, after Beijing enacted a tax reform that closed several loops the independent refiners had at their disposal to reduce their tax burden thanks to friendly provincial regulations. Yet at the same time, the central government plans to raise independent refineries’ crude oil import quotas for next year, which suggests healthy demand expectations.
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As for the source of these imports, there have been a couple of interesting developments lately: earlier this month it emerged China had cut U.S. oil imports to zero in August amid the deepening trade row, but at the same time it has turned its attention further north, to Canadian crude.
Chinese refiners are buying more and more very cheap heavy Canadian crude oil to make up for the dwindling supply of Venezuela’s heavy grades as China’s road construction sector—a key consumer of the heavy oil’s bitumen yield—is booming. Canadian crude is trading at a discount of as much as US$50 to WTI.
By Irina Slav for Oilprice.com
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