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China’s crude oil imports dropped in May from a monthly record in April, as Chinese refiners drastically reduced Iranian oil imports after the end of the U.S. waivers and as some state refineries were offline for planned maintenance.
According to data from China’s General Administration of Customs, reported by Reuters, Chinese crude oil imports fell by 8 percent from 43.73 million tons in April to 40.23 million tons in May. This, converted in barrels per day, is an 11-percent drop from April to May, to average 9.47 million bpd last month, according to Reuters estimates.
According to Seng Yick Tee, an analyst with Beijing-based consultancy SIA Energy, the key reason for the lower Chinese crude oil imports in May was the sharp drop in imports from Iran as the U.S. ended all sanction waivers for Iranian customers on May 2, including for Iran’s biggest oil buyer China.
In April, just before the waivers ended, China had stocked on Iranian crude oil. China imported around 800,000 bpd of crude from Iran in April—the highest amount that Iran’s top oil customer had purchased since August of 2018—as Chinese refiners rushed to buy Iranian oil ahead of the expiry of the U.S. sanction waivers.
The surge in Iranian imports in April resulted in China setting a new monthly oil import record that month, despite the fact that there was refinery maintenance and fuel demand was lukewarm, analysts told Reuters at the time.
Apart from the sharp drop in Iranian imports and regular maintenance at several refineries, another factor for the decline in Chinese crude oil imports in May were the weak refining margins across Asia.
Although refiners in Asia are not left without choice for crude oil after the end of the U.S. sanction waivers for Iranian oil, the higher price of alternative supplies, as well as soaring fuel exports from China, are depressing refining margins across Asia.
Last month, reports emerged that persistent pressure on profit margins had forced Asian refiners to start considering a reduction in their run rates as Asia’s refining margins slipped to a 16-year low.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.