China imported 11.69 million barrels of crude oil daily last month, up by 21 percent on the year, Reuters has reported, citing official customs data.
Earlier this month, energy analytics services provider OilX calculated China’s March oil imports at 11.26 million bpd, noting, however, that these calculations did not include Iranian oil, which China has been buying in ever greater amounts.
Despite being 21 percent higher on the year, the March average was lower than the average for February, which came in at 11.73 million barrels daily, Reuters noted. Analysts now expect a further slowdown in oil imports as refiners start seasonal maintenance. It’s also worth mentioning that March 2020 was a month of lockdowns in China, which severely affected the country’s oil consumption along with all other commodities.
In addition to the seasonal factor, higher oil prices will also likely discourage a rebound in oil buying by Chinese refiners and traders, according to one analyst from energy consultancy FGE.
There is also another factor that could see lower imports from “official” sources: China recently struck a massive investment deal with Iran and has been buying millions of barrels of Iranian crude on the quiet. Analysts believe that Iran has offered China significant discounts on its crude to stimulate more purchases, despite U.S. sanctions and warnings from Washington to stop buying Iranian crude.
Discounts will be important as oil prices tick higher, hovering around $60 a barrel. On the other hand, a decline in Chinese imports for whatever reason would likely pressure prices, especially because it would coincide with OPEC+’s production increases that aim to return some 2 million bpd to global markets by July. This would be a welcome development for Chinese independent refiners, who are currently enjoying rising refining margins thanks to a pickup in construction activity across China after the end of winter.
By Irina Slav for Oilprice.com
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Despite the pandemic, China’s oil imports in 2020 broke all previous records, averaged 11.67 mbd and were 10% higher than in 2019.
China has been getting an estimated price discount ranging from $3-$5 a barrel from Iran.
With the opening of the global economy and the steep decline in the oil glut in the market, the global oil market could easily accommodate some 2.0 mbd that OPEC+ intends to return in instalments to oil markets by July particularly with China’s soaring imports.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London