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China’s oil imports may have declined in March, a Reuters poll of 31 economists showed on Monday, while experts expect China’s economy to have sharply contracted in the first quarter of the year due to the coronavirus pandemic.
China, the world’s top oil importer and key oil demand growth driver, went in lockdown at the end of January and February to try to stop the spreading of COVID-19. As a result, demand for energy for industrial activity and for fuel sharply dropped.
Chinese oil imports held up in the first two months, because volumes had been contracted weeks before the first public announcement of the virus and because Chinese refiners typically stock up on crude before the Chinese Lunar New Year, which was at the end of January this year. China’s crude oil imports increased by 5.2 percent on the year in January-February to come in at 10.47 million barrels per day (bpd), according to Reuters calculations on data from the Chinese General Administration of Customs.
In March and early April, China was said to have been building its crude reserves, thanks to the cheapest oil in years, but the rate of filling storage would be lower than in previous years because of limited storage capacity, lending less support to oil prices this time around than in previous years, Wood Mackenzie said at the end of last month.
Oil imports, however, are just a part of China’s trade and economy, which as per the Reuters survey, are expected to have contracted in March because of limited demand from overseas amid lockdowns in major other economies.
According to economists polled by Reuters, China’s first-quarter GDP likely contracted sharply, for the first time in nearly 30 years, since 1992.
While China reopened cities and the economy, the rest of the world started to close down to try to flatten the curve of the coronavirus cases.
“Despite some possible improvements in economic activity in March, first-quarter GDP growth is expected to contract by 10% from a year earlier,” Tao Wang, an economist at UBS, told Reuters, referring to the Chinese economy.
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.
You simply need common sense. If the global oil demand has lost an estimated 30 million barrels a day (mbd) or 30% and with China accounting for 15% of global demand and 20% of oil imports, it would be logical for China’s oil imports in March to decline.
You have to judge the growth of China's imports from the second half of April in the aftermath of the ending of the lockdown. You will find that from now on Chinese oil imports will accelerate possibly doubling if not tripling on what they were before the outbreak.
China is already bouncing back extremely quickly in all sectors, except those relating to the service industries with projections already abound that China could grow at 6.8% in 2021 compared with 6.1% in 2019. Given the speed by which China is bouncing back, it could be projected to grow at 4%-5% in the second half of this year compared with 3%-3.5% in the first half.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London