China’s Crude Oil Imports (Current & Forecasts)

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After OPEC has brought the decision on extending the output cuts, China’s refiners now have to slow their purchases of oil, for the next 2 months.

China is the world’s top Oil buyer. Interesting fact is that country’s appetite for crude oil fell. Leveling the 8.4 million bpd in April. While in March it reached the top of 9.2 bpd. This will also impact the country’s demand.

Shandong’s individual and independent refiners are facing pressure to cut their production because profit margins are now lower. This is happening due to Beijing’s custody. Beijing aims to refresh taxes and shifting policies, and balance the country’s economy this way.

Some of the refiners have even begun the seasonal work.

State Oil majors

China’s state Oil majors plan to put up new refining capacities till the end of this year. This way they aim to replace some import losses.

However, the lower country’s appetite and the demand which is slightly losing its upward momentum lead to a certain conclusion: China’s oil market is possibly slowing the movement.  

“There will be more shutdowns in June, July and possibly August. It’s seasonal but also because the market is not doing well and stocks are plentiful.” (Said manager of one Independent refining company.)

These independent refiners participate in China’s crude demand with 12 %. Since 2015, when they won the rights to import oil – they have been enjoying high profits. Doing so by selling diesel and gasoline throughout Asia. And at the same time expanding domestic sales in unique competition with state firms.

In January this year, Beijing put a ban on all the independents possibilities to export the fuel. This way it was openly  favoring the big state-owned refiners. And it squeezed margins for independents. Beijing  tensed custody on tax practices.

“Some refineries had rushed to buy crude in the first quarter, worried that they could be penalized for slow use of import permits.”

“There were some over-purchases of crude earlier as (plants) were unsure of the quota policy. Now inventories are high everywhere.” (Wang)

Further Imports

“Policy headwinds, domestic competition from SOEs (state-owned enterprises) and insufficient storage infrastructure at major port cities will cap imports.”

Observing the inventories in Shandong, diesel’s were pretty high compared to gasoline. Wang (official of one independent refinery) has said that his plant has plans to shut the 90,000 bpd crude units. All of that through July, aiming to improve the current situation.

CNPC and CNOOC

China’s state oil companies plan to strengthen the crude oil imports from August onward. Doing so by activating new refineries in Yunnan and Huizhou with combined capacity of 460,000 bpd.

There are some other Country’s projects which will stimulate the crude oil imports in middle-term.

Towards April and May, Beijing has gave permissions for 6 independent refiners to import crude oil. Total permits were around about 280,000 bpd. Some of these approvals are still preliminary, but worth mentioning is that they had the influence over market.

Harry Liu, an analyst at consultancy IHS Markit, estimated China’s total imports have fallen to around 8 million bpd at present, but could climb back to around 8.5 million bpd from around August. (Reuters)

“CNPC and CNOOC will contribute the bulk of the increases in refinery runs later this year. Teapots’ contribution will be smaller as the environment for them to grow has got much tougher this year.” Liu said.