China’s sluggish crude oil trade in the first quarter of the year has added to macroeconomic concerns and banking sector jitters to keep oil prices around $80 a barrel so far in 2023, despite the Chinese reopening and expectations of stronger demand in the world’s top crude importer later this year.
China’s imports of crude oil surged by 22.5% year-over-year in March to the highest monthly volumes in nearly three years since June 2020, official data showed in April as refiners were increasing fuel output to meet expected rising demand.
China imported as much as 52.3 million tons of crude oil in March, per data from the country’s General Administration of Customs cited by Reuters. The import volumes in tons equal 12.3 million barrels per day (bpd)—the highest for any month since June 2020 and much higher than the 10.1 million bpd of crude oil imports in March 2022.
For the first quarter, China’s crude oil imports rose by 6.7% compared to the same period in 2022, according to the customs data.
But crude oil imports in April fell compared to March. China crude oil saw arrivals in April at just 10.67 million bpd, significantly down compared to 12.37 million bpd imports in March, according to Refinitiv data.
So in the first four months of 2023, China’s crude oil imports rose to 179 million tons, up from 171 million tons for January-April 2022, but below 180 million tons imported in the same period of 2021, according to data from the General Administration of Customs cited by Reuters market analyst John Kemp. Related: Clean Energy Megaprojects Face Iron Law
Apart from a surge in March, Chinese oil imports so far this year haven’t been as strong as initially expected, weighing on oil prices alongside the banking sector turmoil and fears of a recession as a result of rising interest rates.
Underwhelming economic data from China in recent weeks have also depressed market sentiment.
However, analysts and major forecasters continue to believe that the true Chinese rebound will take place in the second half of the year, with higher jet fuel and gasoline demand thanks to increased mobility, strong demand for petrochemicals feedstock, and a recovery in infrastructure and construction activities.
China’s economic growth could exceed official targets and consumer mobility and spending could surge to super-charge a renewed increase in energy commodity prices, especially crude oil, Wood Mackenzie said in a report at the end of March.
Under WoodMac’s base-case scenario, Chinese oil demand would rise by 1 million bpd this year, driving the expected 2.6-million-bpd growth in global oil consumption. In a high-growth scenario, the world’s top crude oil importer could see oil demand jumping by 1.4 million bpd on the year, or about 400,000 bpd higher than in the base case, driving up oil prices by another $3-$5 per barrel compared to the base case.
Both OPEC and the International Energy Agency (IEA) are upbeat on Chinese demand in their latest monthly reports for May.
OPEC sees China leading the expected 2.3 million bpd global oil demand growth, while the IEA noted that Chinese oil consumption in March set an all-time record-high at 16 million bpd.
The Chinese recovery continues to exceed expectations, the IEA said in its Oil Market Report last week and raised its global oil demand growth forecast for 2023.
The world’s oil demand is set to rise by 2.2 million bpd this year to a record 102 million bpd, said the IEA, which revised up its growth forecast by 200,000 bpd compared to last month’s assessment.
Rising Chinese demand and crude oil imports could tighten the oil market later this year if the U.S. manages to avoid a severe recession.
By Tsvetana Paraskova for Oilprice.com
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