China added 2 million bpd to its crude oil inventories last month, Reuters' Clyde Russell reported today, citing calculations based on official data.
This means the world's largest oil importer was buying more from abroad, although Russell noted that these purchases were most likely made months earlier, before Russia's invasion of Ukraine in late February.
Imports of crude in China averaged 10.47 million barrels daily, Russell noted, adding that local production was estimated at 4.14 million barrels. This meant a total supply of over 14 million bpd.
Yet refinery run rates averaged 12.61 million barrels daily, the Reuters columnist explained, leaving a difference of around 2 million bpd to be put into strategic and commercial reserves.
This amount compares with 610,000 bpd added to inventories in March and brings the average inventory additions for the first four months of the year to 960,000 barrels daily.
In the coming months, analysts expect higher imports, especially from Russia, thanks to the discount at which Russian crude is trading because of Western sanctions.
Meanwhile, Goldman Sachs analysts lowered their GDP forecast for China to 4 percent from 4.5 percent for this year, citing economic damage resulting from Covid.
"Even this lower growth projection embeds the assumption that COVID is mostly under control going forward, the property market improves from here, and the government provides substantial policy offset through infrastructure spending in coming months," the analysts wrote in a note, as cited by Reuters.
China's Covid lockdowns last month served to dampen the oil price rally a little at a time when bearish factors were in very short supply. The lockdowns caused a sharp contraction in Chinese factory activity last month as well as in its retail industry. Fear of more lockdowns and the consequent economic effects remain the one strong bearish factor for oil still.
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
Comments
Even at the height of the pandemic in 2020 when global oil demand collapsed, China first surprised the world by an early exit from the lockdown and again by its surging crude imports which have averaged 11.76 million barrels a day (mbd) in 2020 or 11% higher than 2019.
During the recent lockdown in the Shanghai region and few other regions, analysts, investment banks and the IEA were competing among themselves in reporting Chinese declining oil demand whilst I was warning against judging China’s demand by a one-month decline saying it has to be judged over a year.
China has again surprised the world by having been adding 2.0 mbd to its inventories even at prices ranging from $110-$114. Moreover, I bet you any money that the bulk of these imports were Russian oil barrels.
Meanwhile, Goldman Sachs analysts lowered their GDP forecast for China to 4% from 4.5% for this year blaming it on COVID. Again, China will prove them wrong and will grow at 5%-5.5%.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London