Chinese refineries processed 102.49 million tons of crude oil during the first two months of the year, up 6.1 percent on the year, according to customs data. This translated into 12.68 million bpd, which was the highest on record, according to calculations made by Reuters.
Most of this crude oil, based on import figures, came from abroad. February marked the fourth month in a row of crude oil imports into the country exceeding the 10-million-bpd mark.
In February, China imported 39.22 million tons of crude, or 10.23 million bpd, up 21.6 percent on the year. In January, imports stood at 42.6 million tons or 10.03 million bpd, up 4.8 percent on the year.
Independent refiners, commonly called teapots, led the increase in November 2018 when the country hit an all-time high of 10.43 million bpd. That record came as a result of teapots rushing to exhaust their 2018 crude oil import quotas before the year was over.
This year, the initial round of independent refiner quotas are lower, as the local market sinks in a glut of fuels and the regional market begins to feel the margin squeeze of cheap Chinese fuel exports.
According to Bloomberg Intelligence analyst Lu Wang, some 890,000 bpd in new refining capacity will come on stream in China. Next year, the amount of new capacity to start operating will stand at 1.08 million bpd. In 2021, another 1.12 million bpd will be added.
As a result, it's reasonable to expect an even worse glut, especially as the new emission rules of the International Maritime Organization enter into effect next year, hitting demand for high-sulfur bunkering. And yet, demand for crude oil remains strong in China, according to some industry sources.
The latest indication of its strength was the resumption of U.S. oil imports earlier this month. A tanker that can carry 600,000 bpd offloaded a crude cargo from the Eagle Ford on March 1, Reuters shipping data showed. This was the first U.S. oil cargo to reach China since August last year.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More