China has supported oil markets with its purchases of record volumes of crude oil in recent months, but it has also imported doubled volumes of fuel blending products, suggesting that the fuel demand recovery in the world’s top oil importer may be more impressive than expected, its top refiner Sinopec said on Tuesday.
China’s imports of the so-called mixed aromatics, used in gasoline production, doubled between January and July 2020 compared to the same period last year, said Fairy Wang Pei, head of the research and strategy department at Unipec, the trading division of Sinopec, as carried by Bloomberg.
Chinese imports of light-cycle oil (LCO), which is used in blending for diesel production, soared 115 percent in the same period, Wang said at the Platts APPEC 2020 conference.
According to Unipec’s executive, fuel consumption in China was back to the year-ago levels as early as in May. The soaring purchases of mixed aromatics and LCO could mean that China’s demand recovery could be more impressive than previously thought, as imports of those products are not included in official statistics of crude oil imports, Wang said.
Unipec expects that actual Chinese fuel demand, which has recovered quickly, may be higher than official figures show, according to Wang.
Earlier this year, China imported record volumes of crude oil in May and June, as the oil-hungry nation attempted to benefit from the low oil prices in April. The record-breaking crude oil imports supported oil prices through the late spring and summer when oil demand recovery in the rest of the world had just started and then wobbled amid concerns of a second COVID-19 wave.
Yet, China’s feast on low oil prices may now be over. In August, China was expected to have imported what could be the last of the bargain cargoes that refiners had snapped up in April.
Customs data showed that China’s crude oil imports in August fell month over month to 11.18 million bpd, but were still up 13 year over year, with cargoes that had waited to discharge crude at ports finally clearing customs.
By Tsvetana Paraskova for Oilprice.com
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Not only China has been breaking all previous records with its roaring crude oil imports but it is also breaking new records with its purchases of fuel blending products, suggesting that its fuel demand recovery may be more impressive than expected.
Analysts and investment banks rushed to faulty conclusions when there was a slight slowdown in China’s crude oil imports in August. They never thought that the reason could be as simple as China waiting to offload the numerous tankers waiting in its ports before re-embarking on more crude imports.
China’s oil demand has now exceeded the pre-COVID levels and its economic recovery is back to 2019 levels at a time when analysts were suggesting that China’s economic growth in the second half of 2020 is slowing down. Furthermore, the International Monetary Fund (IMF) is projecting that China’s economic growth in 2021 will hit 6.8% compared with 6.1% in 2019.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London