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China reported higher offshore crude oil and natural gas production for the first quarter, with oil production up by 3.8% and natural gas production up by 6.5%, Xinhua reported.
The increase was part of a broader one for the country’s marine economy, which grew by 5.1% during the first quarter, accounting for over 8% of China’s GDP for the period.
China has been active in boosting its domestic production of oil and natural gas in order to reduce its overwhelming dependence on imports. Despite these efforts, imports still remain essential for the economy, accounting for a substantial portion of total consumption.
This year, imports of crude oil are expected to surge to a record high as China reopens after the Covid lockdowns. According to a Reuters poll of forecasters including Wood Mackenzie and Energy Aspects, oil imports to China could hit 11.8 million bpd this year.
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.
Two months ago, imports surged to 12.3 million bpd, the highest level in three years and a 22.5% increase on the year. For the first quarter, China’s crude oil imports rose by 6.7% compared to the same period in 2022, according to customs data.
China is the main factor oil bulls look to when they make trading decisions, with the dominant expectation being one of a strong economic rebound with a similarly strong rebound in travel that would boost demand for fuels.
The economic rebound, however, has not been as straight of a line as many have expected, with the latest PMI reading for the country’s manufacturing sector indicating a contraction in activity.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com