• 4 minute Hey Oil Bulls - How Long Till Increasing Oil Prices and Strengthening Dollar Start Killing Demand in Developing Countries?
  • 8 minutes Could oil demand collapse rapidly? Yup, sure could.
  • 15 minutes Oil and Trade War
  • 3 hours Oil prices going down
  • 49 mins Could oil demand collapse rapidly? Yup, sure could.
  • 12 mins Migrants: Italy Wants EU Border Agency In Africa, Not At Sea
  • 7 hours Sabotage at Tesla
  • 47 mins What If Canada Had Wind and Not Oilsands?
  • 11 mins Sell out now or hold on?
  • 15 hours Oil and Trade War
  • 15 hours venezuala oil crisis
  • 3 hours Trump Hits China With Tariffs On $50 Billion Of Goods
  • 18 hours Malaysia's Petronas vs. Sarawak Court Case - Will It End Up In London Courts?
  • 15 hours When will oil demand start declining due to EVs?
  • 17 hours Russia and Saudi Arabia to have a chat on oil during FIFA World Cup - report
  • 3 hours The Irrelevance Of BTU Rating - Big Oil's Gimmick To Hoodwink The Public
  • 3 hours After Three Decade Macedonia End Dispute With Greece, new name: the Republic of Northern Macedonia
  • 14 hours Germany Orders Daimler to Recall 774,000 Diesel Cars in Europe
  • 11 hours The Wonderful U.S. Oil Trade Deficit with Canada
Alt Text

China’s Oil Demand Could Take A Big Hit

In the last three years…

Alt Text

The Permian Has A Natural Gas Problem

Pipelines in the Permian are…

Alt Text

Elon Musk Survives Attempted Coup

Tesla CEO Elon Musk survived…

Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

More Info

Trending Discussions

Oil Bounces On Iranian Rhetoric

Oil Bounces On Iranian Rhetoric

Oh good. It's only the second day of selling after the recent rampant rally, and yet we are already hearing renewed rhetoric from key producers. Iran is the subject of the latest rumors, said to have agreed to attend next month's producer meeting in Algeria. This has led to a bounce in oil prices, with WTI racing back towards $48 again ahead of a potentially bearish inventory report tomorrow. Hark, here are five things to consider in oil markets today:

1) Although Chinese oil imports have been slowing in recent months after its torrid import pace in spring, we are seeing key producers holding onto their market share. Saudi Arabia is still leading the charge in terms of waterborne imports, accounting for ~16 percent of volumes, while Angola is firmly in second place. Oman, Iraq and Iran are next, accounting for ~10 percent of flows each. Altogether, these five producers account for 60 percent of all waterborne imports:

(Click to enlarge)

2) The slowing in Chinese oil demand appears set to persist as we move into fall, driven by a variety of factors. Ahead of the G20 meeting in Hangzhou early next month, the Chinese authorities have ordered hundreds of factories to curb activity to clear up pollution.

It is estimated that the drop in industrial activity could reduce refinery runs by 400,000 bpd, while the combined impact of these environmental efforts with flooding earlier this summer mean petroleum demand could potentially drop by 250,000 bpd this quarter.

A second factor which is likely to pressure Chinese demand going forward is refinery margins. Record product exports from China are pressuring margins lower in the region. Also, as the chart below illustrates (via@ClydeCommods), refinery margins are in large part dictated by crude prices. The best hope that refinery margins have is a crude sell-off; that means they will likely rise:

(Click to enlarge)

3) What the heck, let's stay on the topic of China. It appears that China's largest oil companies are copying a tactic of 'Big Oil': using dividends to appease investors. Cnooc is considering a special dividend, despite a forecasted 8 billion yuan ($1.2 bln) loss in the first half of this year - driven by an impairment on assets including its Canadian oil sands project. Related: Is ExxonMobil Actually Only Worth A Fraction Of What It Says?

PetroChina, in a similarly appeasing fashion, may pass on 20 billion yuan of proceeds from the sale of its share in Trans-Asia Pipeline Co. - also paid to investors via a special dividend.

Based on production data, the situation for domestic producers is only going to become more challenging amid cost cutting. According to the National Bureau of Statistics, Chinese output fell to its lowest since October 2011 last month, slipping 5.1 percent in the first seven months of the year:

(Click to enlarge)

4) Yesterday we discussed Malaysia, highlighting how Petronas (not Patronus, Harry Potter fans...) has seen its profits shrink by 96 percent last quarter amid a precipitous drop in net income. As we know all too well, all paths lead back to energy, hence the Malaysian economy and currency (hark, the ringgit) are inextricably linked to energy markets. Related: $50 Crude Won’t Fuel Big Oil’s Comeback

As the chart below illustrates, the Malaysian ringgit and crude prices are like Tweedledum and Tweedledee; they strengthen and weaken in lockstep. Hence, the ringgit has weakened considerably since mid-2014, along with the descent in oil prices. As crude plumbed the depths of multi-year lows in early 2016, so did the ringgit.


(Click to enlarge)

5) Energy accounts for ~20 percent of Malaysian GDP; it is not only a net oil-exporter, but it also is the world's second-largest exporter of LNG (behind Qatar). While natural gas production is expected to rise going forward (from 6.6 Bcf/d last year), this will help offset the 9 percent drop in oil production - falling to 635,000 bpd by 2024.

Yesterday we looked at how Asia was the leading recipient of Malaysian crude; our ClipperData below show that U.A.E is the leading supplier of crude to Malaysia, followed by Saudi, Curacao (think: Venezuela) and Nigeria.


(Click to enlarge)

By Matt Smith

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News