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China Stockpiled Ultra Cheap Crude During Lockdown

China imported crude oil at an average rate of around 10.38 million bpd, for a total of 43.91 million tons, according to calculations made by Reuters. The total for the first quarter, according to official customs data, was 130 million tons.

Reuters reported that the March average was an 11.7-percent increase on the year--a signal that the country was stockpiling cheap oil while the price rout continues. Independent refiners again appear to have spearheaded the growth in foreign oil buying, even though domestic—and regional—demand for fuels was lower than supply even before the coronavirus pandemic took hold.

According to one Chinese analyst who spoke to Reuters, the rise in oil imports will continue this month and next. Economic activity in China has begun to recover, albeit slowly. Still, unless a second wave of infections prompts another tightening of the movement of people, chance are it will continue to improve in the coming months.

Interestingly, the oil import increase data comes on the heels of a Reuters poll among economists, who said they expected a dip in imports in March.

Even though this increase in oil buying is good news, it may not be enough. China always buys oil when it’s cheap to fill its strategic reserves. This year, however, it will be buying at a lower than usual rate because there is already quite a lot of oil in storage, according to Wood Mackenzie.

A second major importer, India, is also buying cheap oil for its strategic reserve, lending hope to the battered world oil industry that prices might improve. However, India has limited storage capacity. Data from Refinitiv suggests that February was the strongest month for oil imports since the start of the year, with imports up 10 percent on the year, versus a 5.6-percent increase over January and a 16.4-percent increase for March, 

However, the March total was a record high, at 19.84 million tons, or about 4.85 million bpd.

By Irina Slav for Oilprice.com

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