• 7 hours PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 9 hours Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 11 hours Syrian Rebels Relinquish Control Of Major Gas Field
  • 12 hours Schlumberger Warns Of Moderating Investment In North America
  • 13 hours Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 14 hours Energy Regulators Look To Guard Grid From Cyberattacks
  • 16 hours Mexico Says OPEC Has Not Approached It For Deal Extension
  • 17 hours New Video Game Targets Oil Infrastructure
  • 19 hours Shell Restarts Bonny Light Exports
  • 20 hours Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 1 day Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 1 day British Utility Companies Brace For Major Reforms
  • 1 day Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 2 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 2 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 2 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 2 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 2 days Rosneft Signs $400M Deal With Kurdistan
  • 2 days Kinder Morgan Warns About Trans Mountain Delays
  • 2 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 2 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 2 days Russia, Saudis Team Up To Boost Fracking Tech
  • 3 days Conflicting News Spurs Doubt On Aramco IPO
  • 3 days Exxon Starts Production At New Refinery In Texas
  • 3 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 4 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 4 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 4 days China To Take 5% Of Rosneft’s Output In New Deal
  • 4 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 4 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 4 days VW Fails To Secure Critical Commodity For EVs
  • 4 days Enbridge Pipeline Expansion Finally Approved
  • 4 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 4 days OPEC Oil Deal Compliance Falls To 86%
  • 4 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 5 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 5 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 5 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 5 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 5 days Aramco Says No Plans To Shelve IPO
Alt Text

Rising OPEC Production Weighs On Oil Prices

After seeing a slight drop…

Alt Text

Is The Aramco IPO On The Brink Of Collapse?

Conflicting news suggests that Saudi…

Alt Text

Who Are The Biggest Buyers Of U.S. Oil?

Exports of U.S. petroleum and…

China’s Refiners Report Glut In Distillates

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:




Back to homepage


Leave a comment

Leave a comment




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