• 3 minutes Natural gas is crushing wind and solar power
  • 6 minutes OPEC and Russia could discuss emergency cuts
  • 8 minutes Is Pete Buttigieg emerging as the most likely challenger to Trump?
  • 11 minutes Question: Why are oil futures so low through 2020?
  • 13 minutes Don't sneeze. Coronavirus is a threat to oil markets and global economies
  • 2 hours So the west is winning, is it? Only if you’re a delusional Trump toady, Mr Pompeo, by Simon Tisdall
  • 31 mins Peak Shale Will Send Oil Prices Sky High
  • 1 hour "Criticism of migration will become a criminal offense.  And media outlets that give room to criticism of migration, can be shut down." - EU Official to the Media.
  • 4 hours Fight with American ignorance, Part 1: US is a Republic, it is not a Democracy
  • 5 hours Charts of COVID-19 Fatality Rate by Age and Sex
  • 5 hours CDC covid19 coverup?
  • 37 mins Oil and gas producers fire back at Democratic presidential candidates.
  • 20 hours “The era of cheap & abundant energy is long gone. Money supply & debt have grown faster than real economy. Debt saturation is now a real risk, requiring a global scale reset.”"We are now in new era of expensive unconventional energy
  • 6 hours Democrats Plan "B" Bloomberg Implodes. Plan "C" = John Kerry ?
  • 21 hours Who decides the Oil costs?
  • 24 hours Blowout videos
Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

More Info

Premium Content

China’s Refiners Report Glut In Distillates

It is national rubber ducky day, and the crude complex is acting accordingly – managing not to sink for the first time this year. After seven consecutive down days, prices are mustering a relief rally and scrambling away from twenty-dollardom…for now.

Last night’s weekly API report yielded some scraps for the bulls to feast on. Even though gasoline inventories saw a hugely huge 7 million barrel build, crude inventories dropped by 3.9 million barrels. The report also indicated that Cushing stocks dropped, easing lower from a record level. The API report has accordingly adjusted expectations ahead of the EIA’s report today, which had been projecting a solid 2.5 million barrel build to crude stocks.

In terms of economic data flow overnight, Eurozone industrial production disappointed, as November saw contraction of 0.7 percent on the prior month, now only up 1.1 percent YoY. Brazilian retail sales came in better than expected for November, but still down 7.8 percent YoY. Once again there is little in the way of economic data out in the US, with only the excitingly-named beige book out later today.

The most important data out overnight was Chinese trade data, and it wasn’t actually half that bad. Exports only dropped 1.4 percent in December (versus consensus of -8.0 percent), while imports only fell 7.6 percent (versus an expected -11.5 percent). Related: $20 Oil Is Now A Distinct Possibility As Chinese Demand Wanes

 

Much is being made of the latest data from the Chinese General Administration of Customs, which showed Chinese crude imports reached a record of 7.85 million bpd last month (up a record 9 percent last year). While this is impressive, there are a number of factors at work here.

Not only is it a seasonal trend for crude imports to rise in December, as refineries fulfill import targets and build up stockpiles ahead of the Chinese Lunar New Year, but private refiners – also known as ‘teapots’ – have recently been granted the ability to import crude, and are taking full advantage of it. ‘Teapots’ have been granted a quota which equates to ~18 percent of total crude imports, a sizable amount.

Finally, an ongoing pursuit of strategic reserves is also likely still at play, as China targets 90 days of coverage for net imports by the end of the decade (this equates to ~560 million barrels; the current SPR is estimated at ~220 million). Related: Crashing Oil Prices And Dropping Rig Count Take Their Toll On U.S. Output

To put these crude import numbers in context with our ClipperData, we see reason for caution. Even though we saw waterborne imports up over 7 percent in 2015, volumes were lower for the last three months versus the year prior – the likely impact of economic weakness really starting to bite.

The easing of restrictions on teapot refiners is also giving way to higher refining to meet gasoline demand growth. This grew by nearly 8 percent YoY in 2015, as Chinese consumers bought more cars and drove more miles. Nonetheless, the increase in refining to meet rising gasoline demand has caused a growing glut of distillates.

While gasoline consumption charges higher, softening industrial output means a lesser need for diesel. Accordingly, this growing glut of distillates is being exported. Hence, as crude imports reach a record, so do product exports – up 22 percent last year. All this means that China has now become a net exporter of products.

 

After that rant on China, I leave you with this pretty nifty graphical representation of rising global crude supply, from 2005 to present: Related: Statoil CEO: Expect Volatility Now, Price Spike Soon

By Matt Smith

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage




Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News