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Page added on January 25, 2018

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Oil imports by China could lead to zero-sum game

Consumption

One of the assumptions most observers of the crude oil market make is that China will continue to be the engine of global demand growth, thereby providing underlying support to prices.

It’s not an unreasonable assumption, given that the world’s largest importer brought in 8.4-million barrels per day in 2017, 10.1% more than in the prior year, according to customs figures.

The extra 800,000 barrels per day China imported in 2017 was about half of total global demand growth.

However, there are increasing signs that China’s crude oil imports are moving toward becoming a zero-sum game, insofar as much of the rise in imports is being exported as refined fuels.

A zero-sum game is when the gains of one group are cancelled out by the losses of another.

While China isn’t exporting every extra barrel of crude it imports as refined products, it is increasing its overseas fuel sales, thus potentially displacing crude demand at refiners it is successfully challenging for market share.

China will import 452-million tonnes, equivalent to 9-million barrels per day in 2018, a gain of 7.7% from 2017, state-owned major China National Petroleum Corp (CNPC) said in its annual outlook released earlier in January.

That would be an increase of about 600,000 barrels per day in imports from 2017, a slower growth rate than what was achieved in 2017 but still a significant pull on global demand for crude.

However, CNPC also forecast that China’s refined product shipments would surge in 2018, with net diesel exports expected to jump 47% to 23.8-million tonnes, or about 509,000 barrels per day.

Net exports of petrol were forecast to increase 23% to about 12.8-million tonnes, or about 298,000 barrels per day.

Full-year figures have yet to be released by China customs, but for the first 11 months of 2017 diesel exports were about 342,000 barrels per day and petrol shipments were about 217,000 barrels per day.

If CNPC’s forecasts are accurate, this implies that in 2018 diesel exports will rise by about 167,000 barrels per day and petrol by about 81,000 barrels per day.

Taken together, it means that about 230,000 barrels per day of China’s additional crude demand in 2018 will simply be refined and sent back to the global products market.

China’s fuel exports may affect crude. This fuel can be absorbed if there is sufficient demand growth for refined fuels, but if there isn’t, then China’s additional refined product exports may end up displacing crude demand in other countries that export fuels.

In the Asian context this means India, Singapore, Japan and South Korea, all of which have refineries that export some, or even significant amounts, of their production.

There are already signs that Chinese exports are having some effect on refinery profits in the region, with the margin per barrel at a typical Singapore refinery dropping to $6.22 during Thursday’s trade down from the recent peak of $9.07 in September, and also below the 365-day moving average of $7.01.

Of course, higher crude oil prices are also squeezing margins in Asia, but a surge in exports from China is likely to be the last thing the region’s refineries will be wanting.

If refiners across Asia continue to feel pain from rising Chinese exports and higher crude prices, with Brent futures up 5.5% from the end of 2017 to the close of $70.53 on Wednesday, then expect to see a response in physical crude prices.

This is likely to manifest itself in widening discounts to price benchmarks in the official selling prices (OSPs) of major exporters such as Saudi Arabia.

Already the Saudis kept the OSP of their benchmark Arab Light grade at a premium of $1.65 to regional marker Oman-Dubai for February-loading cargoes, the same as for January shipments.

The steady price came after four consecutive monthly increases, and it won’t be a surprise if the OSP is lowered for March cargoes when the Saudis release pricing details early in February.

Business Day



23 Comments on "Oil imports by China could lead to zero-sum game"

  1. Cloggie on Thu, 25th Jan 2018 4:23 pm 

    “New Silk Road is booming”

    25 trains per week between Duisburg/Germany and China.

    http://www.tagesschau.de/wirtschaft/seidenstrasse-107.html

  2. MASTERMIND on Thu, 25th Jan 2018 5:26 pm 

    Clogg

    You are a very weird person..The reason is if you are so confident about renewables and think peak oil is nothing to worry about..Then why do you spend all of your time on a peak oil blog? Your logic is like an Atheist going to church all the time to try to argue with believers every day…Makes no fucking sense at all…

  3. MASTERMIND on Thu, 25th Jan 2018 5:50 pm 

    CLogg

    The only way peak oil could be proven wrong is if some major and I mean major new gigantic oil discoveries are made in the next few years. And new oil discoveries peaked back in the 1960’s. So the chances are very slim especially considering they use 3D mapping and sonar technology now to search for oil and can see down all the way to the earth’s crust to find it.. But its hard to find something that doesn’t exist! Like God! LOL

  4. Cloggie on Thu, 25th Jan 2018 9:35 pm 

    Originally I believed in peak oil supply as well, until November 2012. That was why I’m here. But over the years I began to see that there is enough fossil fuel left and on top of that that renewables have become very cheap and already have beaten fossil and the gap will even widen further.

    The fact that peakoil.nl, theoildrum.com and now aspo-usa.com closed shop should give you reason to pause. Of course it doesn’t because a nihilistic drama queen like you who can hardly carry his own weight needs peak-oil like flies need shit.

    Why I’m still here? Mwoah… habit, socializing, making fun of true believers like you, pushing renewable energy, discussing current affairs, history, geopolitics, etc.

    But energy ptoblems… one big yawn. There is no energy problem.

  5. MASTERMIND on Thu, 25th Jan 2018 10:38 pm 

    Clogg

    top of that that renewables have become very cheap and already have beaten fossil and the gap will even widen further.

    Solar and Wind produced less than one percent of total world energy in 2016 – IEA WEO 2017
    https://www.iea.org/publications/freepublications/publication/KeyWorld2017.pdf

    Fossil Fuel Share of Global Energy since 1990 – BP 2017
    https://imgur.com/k7VecMq

    How exactly are they filling the gap? One percent a decade is filling the gap you think?

    And why are you ignoring the peak oil warnings now from the IEA and Saudi’s? And why do you think the problem is solved when we are discovering less oil than ever and using more than ever? Do not understand how math works? Are you autistic?

  6. Antius on Fri, 26th Jan 2018 10:54 am 

    Any trade with China is a zero sum game. They are the most mercantile nation on the planet. Every dollar invest, every barrel or electric motor you export to them, will be used to undermine you in one way or another.

  7. Antius on Fri, 26th Jan 2018 11:01 am 

    Campbell’s discovery trend line between 200-2020, appears to actually over predict the oil discovery rate up to now.

    He correctly predicted a peak in conventional oil production around 2005. That was the beginning of the bumpy plateau. Were it not for shale oil, the world would see an outright decline by now. The North Sea is long past peak. The UK section will soon finish completely, not even remaining as a small residual production zone. It is 90% depleted. Very few nations are now capable of increasing conventional oil production, whether it be onshore or offshore. The world (increasingly) turns its hopeful eyes to unprofitable US tight oil – the most expensive oil on the planet.

  8. Boat on Fri, 26th Jan 2018 11:24 am 

    AntiUS,

    Rystad Energy has a good reputation in the oil business and is quoted as a source all over the world. Their research comes up with a 70 year supply of reserves at todays prices.
    Oil companies spent somewhere around 410 billion the last couple years when 970 billion was closer to the number when prices were much higher for discovery. As prices go up investment in discovery will return. We will see how well they do. Right now capital is going into more sure plays. At $60 and above there is a lot more money once a few bills are paid.

  9. MASTERMIND on Fri, 26th Jan 2018 11:33 am 

    Boat

    Are you going to ignore the discovery data with you own eyes and the IEA and Saudis and believe some fringe Rystad energy? Are you Autistic?

  10. MASTERMIND on Fri, 26th Jan 2018 11:36 am 

    Boat

    oil discoveries have lagged annual production since the 1980s.
    https://imgur.com/a/6dEDt

    Now, this problem has nothing to do with the recent decline in the oil price, which started in 2014. This has been an on-going problem for the past 30 years. Even when oil was 100 plus they didnt find shit and they had plenty of money!

  11. MASTERMIND on Fri, 26th Jan 2018 11:38 am 

    The End of the Oil Age is Imminent

    Recently, the HSBC oil report stated that 80% of conventional oil fields were declining at a rate of 5-7% per year. This means that there will be an oil shortage of ~30 million barrels per day by 2030 and ~40 million barrels per day by 2040.
    http://www.scribd.com/document/367688629/HSBC-Peak-Oil-Report-2017

    What is mentioned far less often is that annual oil discoveries have lagged annual production since the 1980s.
    https://imgur.com/a/6dEDt

    Now, this problem has nothing to do with the recent decline in the oil price, which started in 2014. This has been an on-going problem for the past 30 years. Now, the IEA is predicting oil shortages by ~2020 due to declining exploration.
    https://www.wsj.com/articles/iea-says-global-oil-discoveries-at-record-low-in-2016-1493244000

    Here, the IEA blames this problem on the low oil price. But, this problem started in the 1980s. The problem is geological: we are running out of conventional cheap oil. Shale and tar sands are not the answer, either. Those resources are far too expensive, compared to conventional oil, because the global economy is based on cheap conventional oil. Expensive oil is not a replacement for cheap oil.

    Based upon the HSBC report and the IEA, the End of Oil Age will start around ~2020: there will be a dramatic economic depression due to exhaustion of cheap oil. This will cause a global economic collapse.

  12. Boat on Fri, 26th Jan 2018 11:42 am 

    The total proven world reserves is a number that changes every year with the price of oil. How much is found every year is just one input compared to how much is left. How much is left is a much more important number. Show me your peer reviewed numbers on proved reserves. punk, lol

  13. Boat on Fri, 26th Jan 2018 11:45 am 

    You complain about rystad but counter with what. We didnt find enough? Oilbis the worlds largest traded commidity. Show me the 97 mbpd drop for the last 10 years.

  14. Boat on Fri, 26th Jan 2018 11:52 am 

    The US as Obama reported the US had 3% of the worlds oil. Fracking came and now the US hasvone of the highest amounts of reserves. Where was that on the friggen chart. Talk to me in data punk. Your emotional tiraids dont move me. PS none of this 2003 20010 shyt works.

  15. MASTERMIND on Fri, 26th Jan 2018 12:35 pm 

    Show me the 97 mbpd drop for the last 10 years.
    https://imgur.com/a/6dEDt

    I have showed you countless times you fucking retard! And shale in the US can’t make up for natural depletion of all the worlds conventional legacy supplies all on its own. But don’t take my word on listen to CEO of Chevron

    Chevron CEO warns US shale oil alone cannot meet the world’s growing demand for crude
    https://www.cnbc.com/2017/05/01/us-shale-cannot-meet-the-worlds-growing-oil-demand-chevron-ceo-warns.html

  16. MASTERMIND on Fri, 26th Jan 2018 12:38 pm 

    Show me your peer reviewed numbers on proved reserves. punk, lol

    Projection of World Fossil Fuels by Country (Mohr, 2015)
    http://www.sciencedirect.com/science/article/pii/S0016236114010254

    My pleasure Boat! And that peer reviewed study has coal and gas reserves estimated as well! Consider that a bonus! LOL

  17. MASTERMIND on Fri, 26th Jan 2018 12:41 pm 

    US Middle class no longer dominates and is now the minority (2015)

    http://money.cnn.com/2015/12/09/news/economy/middle-class/index.html

  18. MASTERMIND on Fri, 26th Jan 2018 12:43 pm 

    A world no longer powered by fossil fuels, no matter what incarnation, is almost inconceivable and terrifying for Boat. . It is indeed traumatic for what it might (probably) mean not just for us but also for our love ones, children, grandchildren. Our hearts break. We want to fix it.

  19. MASTERMIND on Fri, 26th Jan 2018 1:19 pm 

    Boat

    Stop trying to use gasligthing on everyone with your false rystad evidence…

  20. Boat on Fri, 26th Jan 2018 2:43 pm 

    MM,

    You like to quote OPEC. Google world proven reserves since 1980. They got a big chart showing the total never dropping once.

    Eia, In 1940)the US had 30 billion in reserves. In 2016 it was down to 35 billion. Lol

    Of course rystad which is from norway, #1 country in the world for honesty, shows the US closer to 300 billion in reserves.

    In the US alone proved reserves does not count all the land that Trump wants to open up. And lastly with oil being up over $20 will reopen that 5 mbpd they took off in 2015. Lot’s of oil gonna be around proving doomers just don’ t google well and talk a lot of shyt. For you the end of 2020 will be telling. World reserves will be higher, demand will be strong any shortage will be short term.

  21. MASTERMIND on Fri, 26th Jan 2018 2:56 pm 

    Boat

    All you have to do is look at the discovery data! You have to discover oil first before you can pump it! And the discovery data speaks for itself!
    https://imgur.com/a/6dEDt

    BP 1.7 Trillion barrels proven oil reserves NOT so proven
    http://crudeoilpeak.info/oil-reserves-and-resources-as-function-of-oil-price

  22. MASTERMIND on Fri, 26th Jan 2018 2:57 pm 

    Boat

    You just can’t handle the truth…Grow a pair

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