China’s oil demand could soon rebound as the country reopens from Covid after nearly three years. Authorities have issued a massive batch of allowances for independent refiners to import crude oil.
China’s latest batch of crude import quotas for refiners allows 44 private refiners to import 111.82 million metric tons of crude, traders familiar with the Chinese policy told Bloomberg on Monday. Independent refiners are allowed to import certain volumes of crude oil in several batches each year, with quantities set by the Chinese government.
The quotas for this year are already 132 million tons, compared to 109 million tons of crude oil import allowances issued as of this time last year, according to Bloomberg.
China’s reopening is expected to drive fuel demand growth after the initial exit Covid wave wanes at some point later this quarter.
China’s borders reopening this weekend—after almost three years—sent oil prices surging by 3% early on Monday, as the market expects travel to pick up in the coming weeks and around the Lunar New Year on January 22.
Early on Monday, Brent Crude prices jumped above $80 per barrel again as increased optimism about China’s demand trumped—for the time being—fears of recessions looming this year.
In another sign that China’s refiners could import and process additional crude in the coming months, Chinese authorities have approved exports of gasoline, diesel, and jet fuel of 18.99 million tons—an increase of 46% over the 13 million tons of fuel export quotas China allocated in the first batch for 2022, consultancies based in China told Reuters last week.
The latest batch of fuel export quotas signals China’s willingness to continue supporting refinery throughput and capturing good refining margins in Asia while domestic demand is still weak.
By Tsvetana Paraskova for Oilprice.com
ADVERTISEMENT
More Top Reads From Oilprice.com:
- Oil Prices Plunge Below $80 As Near-Term Demand Worries Grow
- Colonial Shuts Key Fuel Pipeline To The U.S. Northeast
- Leading U.S. Refiner: Expect Tight Gasoline And Diesel Supply This Summer
The quota for 2023 amounts to 132 million tons (968 million barrels) compared with 109 million tons in 2022 or 21% higher. If we extrapolate this to 2023, then we could expect China’s crude imports to be 21% higher than in 2022.
China’s reopening after the strict lockdowns is expected to fuel global oil demand growth and push crude oil prices upward. That is exactly what happened this morning when Brent crude hit $81 a barrel.
Of recent times, oil prices have been pulled in opposite directions by the bullish factor of China reopening and concerns about global recession. However, there is a growing sentiment in the global oil market that the China factor will prevail over concerns about recession.
Another sign of optimism is that Chinese authorities have approved exports of gasoline, diesel, and jet fuel of 18.99 million tons in 2023 compared with 13 million tons in 2022, an increase of 46%.
Prices will continue to be underpinned in 2023 by bullish factors such as the China factor, robust global oil demand and a shrinking global spare production including OPEC’s.
That is why Brent crude is projected to hit $100 a barrel in the first quarter of 2023.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert