China crude oil imports increased in April to about 9.84 million bpd as demand for fuels began to rebound, Reuters reports, citing customs data.
The country’s overall exports posted an improvement from March, at 3.5 percent, despite analyst expectations that they would slump by as much as 15.7 percent. This strongly suggests that a recovery is underway, and it may accelerate in the coming months.
In oil, the average daily imports in China for the first four months of the year stood at 10.11 million bpd, which was a modest increase over the same period of 2019 as refiners ramped up run rates in response to the pickup in industrial activity after the end of lockdowns.
Run rates were at a record last year, as China’s seemingly insatiable demand for crude drove refiners to invest in new processing facilities. The planned increase in refining capacity even gave rise to fears that the industry was facing a capacity surplus. Then, as the coronavirus outbreak squeezed fuel demand, refiners began cutting run rates.
In April, these continued to be depressed at state refiners, but independent refiners, commonly called teapots, began ramping up, Reuters reported in late April. In addition, over the last two months, China was said to have been building its crude reserves, taking advantage of the oil price slump. Even so, the rate of filling storage was expected to be lower than in previous years because of limited storage capacity, lending less support to oil prices this time around than in past years, Wood Mackenzie said at the end of last month.
The news about a rebound in crude imports, however, will likely have a positive effect on international prices as a signal of economic recovery and, consequently, oil demand recovery. How lasting the effect would be remains to be seen as bad economic news continues to come from Europe and the United States, with historic recessions looming on the horizon for most developed economies.
By Irina Slav for Oilprice.com
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China is already bouncing back extremely quickly virtually in all sectors with projections already abound that China could grow at 6.8% in 2021 compared with 6.1% in 2019. Given the speed by which China is bouncing back, it could be projected to grow at 4%-5% in the second half of this year compared with 3%-3.5% in the first half. Moreover, China will be hugely thirsty for crude oil. This development won’t only give a huge impetus to an oil market bereft of good news but may also prevent oil prices from sliding downward further.
This is manifested by the fact that China’s average daily crude oil imports for the first four months of 2020 stood at 10.11 million barrels a day (mbd) which was even slightly higher than the same period of 2019 as refiners ramped up run rates in response to the pickup in industrial activity after the end of lockdowns. Moreover, the country’s overall exports posted an improvement from March, at 3.5% despite analyst expectations that they would slump by as much as 15.7%. This strongly suggests that a recovery is underway, and it may accelerate in the coming months.
In addition, Chinese companies imported about 1.26 million tons of LNG in the week of March 23, which is the first time it’s risen above the 2019 weekly average. This couldn’t have come at a better moment for the global LNG industry as prices have sunk to historic lows.
The restarting of China coincides with the shutting down of most of the world’s economy causing lower commodity prices. Every crisis offers opportunities, including this one. China is seizing the opportunity of super-low oil prices to expand its strategic oil reserves before prices rise again. It is also stocking up on cheap LNG.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London