China’s Oil Imports and Stockpiling Trends

By Clyde Russell

LAUNCESTON, Australia (Reuters) – China’s crude oil imports fell to their lowest in nearly two years in July, yet the country continued to increase its stockpiles amid declining refinery throughput for the fourth consecutive month.

As the world’s largest oil importer, China added approximately 280,000 barrels per day (bpd) to its commercial or strategic inventories in July, according to estimates derived from official data. This figure is significantly lower than June’s addition of 1.48 million bpd, indicating a bearish outlook, especially as crude oil imports for July dropped to the lowest level since September 2022.

While China does not publicly disclose the volumes of crude entering or exiting stockpiles, estimates can be calculated by subtracting the processed crude from the total available crude from imports and domestic production.

In July, Chinese refineries processed 59.06 million metric tons of crude, equating to about 13.91 million bpd, according to data released by the National Bureau of Statistics. This figure represents a 6.1% decrease compared to the same month last year, marking the weakest month on a barrels-per-day basis since October 2022.

With July crude imports reported at 9.97 million bpd and domestic output at 4.22 million bpd, a total of 14.19 million bpd was available to refineries. This leaves a surplus of 280,000 bpd after accounting for processed volumes. Throughout the first seven months of the year, China’s crude surplus reached 800,000 bpd.

Oil Supply Overview
From January to July, oil imports averaged 10.89 million bpd, with domestic output at 4.28 million bpd, providing 15.17 million bpd for refiners. With 14.37 million bpd processed, the overall trend suggests a weakened oil sector as both imports and refinery throughput decline, allowing stockpiles to grow.

This increase in crude storage could give Chinese refiners the flexibility to further reduce imports if crude prices rise due to geopolitical tensions, accelerating global demand, or OPEC+ supply restrictions.

Amidst geopolitical uncertainties, particularly concerning the Middle East and the Russia-Ukraine conflict, market conditions remain critical. Global demand growth is sluggish, and OPEC+ plans to begin restoring some output cuts from October, although they can reassess based on market conditions.

OPEC has already indicated it might lower its bullish demand forecast for China in 2024. Despite making a minor cut in its latest monthly report, OPEC expects China’s oil demand will increase by 700,000 bpd in 2024, contributing one-third of the global rise. This estimate is only 60,000 bpd below their previous forecast.

Given the contraction in crude imports and refinery processing, a strong enough rebound to meet OPEC’s optimistic forecast appears unlikely, despite the minor downward adjustment. The International Energy Agency (IEA) is even more cautious, predicting China’s demand growth will constitute about one-third of the global total increase of 950,000 bpd for 2024, which translates to an expected growth of 313,500 bpd. This estimate seems overly optimistic based on the data from the first seven months of the year.

The opinions expressed here are those of the author, a columnist for Reuters.