China imported 31 percent more oil from Russia last month while its intake of Saudi crude slipped by 1.8 percent compared to March 2019, Reuters reported, citing calculations based on official customs data. Overall crude oil imports rose by 4.5 percent on the year to 9.68 million bpd.
Of the total, Russian oil accounted for 1.66 million bpd while Saudi oil accounted for 1.7 million bpd. The Russian oil average for March, while higher on the year, was lower than the average for January and February, the data showed. Imports from the United States were close to zero, and imports from Venezuela were at zero. Imports from Iran, however, were up 11.3 percent from a year ago at over 625,000 bpd.
Reuters earlier reported China's oil imports in March would likely be lower than in previous months as refiners cut run rates amid the sluggish demand for fuels even though they continued buying oil to build their stocks. Indeed, Reuters' calculations of imports suggested an average daily intake rate of 10.47 million bpd for January and February.
Run rates continue to be reduced at state refiners, but independents are ramping up, Reuters reported. In addition, over the last two months, China was said to have been building its crude reserves, thanks to the cheapest oil in years. 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.
A lot of oil industry players relied on China to buy a lot of oil to fill its reserves and push prices up. The country is the largest importer of crude, which makes it the natural focus of attention for oil producers when prices crash. However, this time the coronavirus changed everything, including Chinese demand. With storage space being finite, even reserve-filling could not help prices, which are now increasingly likely to remain below $20 a barrel for a long while.
By Irina Slav for Oilprice.com
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What is fascinating, however, is that China’s crude oil imports rose by 4.5% on the year to 9.68 million barrels a day (mbd) while its daily intake for January and February averaged 10.47 mbd despite the coronavirus outbreak.
But what is more fascinating is that China’s imports of Iranian crude oil were up by 11.3% from a year ago at over 625,000 barrels a day (b/d) or 28% of total Iran’s oil exports before US sanctions were imposed. This gives the lie to claims that China has stopped or reduced its oil imports from Iran because of US sanctions.
This is a very positive sign for the global oil market with China opening up after it successfully managed to control the coronavirus outbreak. 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.
Furthermore, 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