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Lower crude oil prices will likely prompt Chinese refiners to buy more crude and send more of those volumes to build up stockpiles, after purchases and estimated inventory builds slowed significantly in October and November in response to the 2023-high oil prices hit at the end of September.
As oil prices eased in November and December, Chinese refiners are estimated to have purchased higher volumes of crude oil, and China’s crude oil imports could be on track to rebound in early 2024 if prices continue to remain subdued at below $80 per barrel, according to Reuters columnist Clyde Russell.
During the first half of 2023, China is estimated to have added around 950,000 barrels per day (bpd) of crude to stockpiles, while it likely slowed down stockpiling to around 240,000 bpd between July and November 2023, per Russell’s calculations.
Cheap Russian oil helped China accelerate the pace of stockpiling crude in June to the largest monthly additions to inventories in three years, Russell estimated in the middle of last year.
China does not report commercial or strategic inventories, so analysts are trying to estimate the volume of stockpiling by deducting the amount of processed crude from all available crude coming from imports and domestic crude production.
With oil prices now down by around 20% from the 2023 high of $98 per barrel, Chinese refiners could have more incentives to import larger volumes of crude at the start of this year, especially at prices around $75 a barrel.
China has also just allocated a massive batch of crude oil import quotas to refiners, raising the allowances from early last year by around 60% and allocating full-year quotas to some. The early allocation of a large volume of import allowances would help refiners better plan their crude purchases in 2024, the experts told media on Tuesday.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.