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Page added on October 7, 2020

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China’s crude oil party is finally winding up, now for hangover

Consumption

China’s five-month crude oil party was still going strong in September, but is winding down in October, leaving the industry to ponder just how big the hangover is going to be.

September imports are estimated by Refinitiv Oil Research to be 11.71 million barrels per day (bpd), the fifth straight month that arrivals have exceeded 11 million bpd.

If the official customs data, due Oct. 13, is in line with the Refinitiv figures, it would mean that the last five months have been the strongest on record for China’s crude imports, including the record high of 12.9 million bpd in June.

It’s no secret that the massive flows of crude to China came as Chinese refiners went on a buying spree during the brief price war in April between leading exporters and members of the OPEC+ group, Saudi Arabia and Russia.

Crude prices plunged to the lowest in 17 years in late April after Saudi Arabia and Russia disagreed on whether to extend and deepen output cuts in a bid to support prices.

The Saudis said they would sell as much oil as they could, and the sheer volume of oil being made available, coupled with the economic hit from the spreading novel coronavirus pandemic, saw benchmark Brent futures LCOc1 drop as low as $15.98 a barrel on April 22, some 78% down from this year’s peak of $71.75 in early January.

While the price war didn’t persist, with OPEC+ agreeing to extend and deepen output cuts, it did last long enough to give refiners an opportunity to stock up with bargain-basement crude.

Congestion at Chinese ports meant that some vessels were waiting to discharge for weeks, a factor that also extended the run of record import volumes into September.

However, it appears the queue of tankers waiting to discharge is finally easing, with Refinitiv saying only 4.2 million tonnes, or about 30.66 million barrels, remains waiting to offload.

That’s still enough to ensure October imports won’t fall too dramatically, but it’s likely they will be lower, given the lower volume of crude en route to China.

Refinitiv said September-loading volumes for China were about 8.17 million bpd, well below the second quarter average of 11.87 million bpd.

This figure is for crude loaded onto tankers, and doesn’t include pipeline flows into China from neighbouring countries, such as Russia.

BACK TO NORMAL?

It’s therefore likely that from November onwards China’s crude imports will return to what could be described as more “normal” levels, although it’s also possible they may be softer than usual given high inventory levels.

With China slowing crude purchases, the make-up of its suppliers will become more important in determining the outlook for the various crude price benchmarks.

In theory, China’s appetite for light, sweet crudes such as West Texas Intermediate (WTI) and Brent should be lower than for medium and heavy grades given the configuration of many of its refineries. This favours Middle East producers such as Saudi Arabia, Kuwait, Iraq and the United Arab Emirates.

There is some evidence for this, with imports from the United States, the home of WTI, set to drop from a record of around 838,000 bpd in September to an estimated 538,000 bpd in October, according to Refinitiv data.

Meanwhile, China’s imports from the Middle East have been rising, with Refinitiv estimating flows of 5.2 million bpd in September, up from 4.92 million bpd in August and 5.05 million bpd in July.

Much of the increase has been supplied by Saudi Arabia, with September imports estimated at 1.69 million bpd, up from 1.24 million bpd in August and 1.27 million bpd in July.

But the main issue for crude exporters is that they are likely to be chasing a share of smaller demand from China, at a time when imports by the other top consumers in Asia, such as India and Japan, remain constrained by the ongoing economic weakness caused by efforts to contain the coronavirus pandemic.

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7 Comments on "China’s crude oil party is finally winding up, now for hangover"

  1. Theedrich on Fri, 9th Oct 2020 7:23 pm 

    COMMUNISTS4BIDEN&HAIRY-CAMEL: Revolution 1917!  The Final Solution:  Gulags for all Whites!  End the racist oil industry in America!  Rid the U.S. of industry:  farming only.  Start ridin’ with Biden!  Forbid all pollution:  no more plastics, no more coal, no more ocean fishing.  Back to the basics with Basement Biden.  End mathematics teaching, a device to enforce White supremacy.  And by the way, a free $million/month for all non-Whites.

    That is the Democrat program in a nutshell.  Much better than listening to the “unpresidential” Orange Man.

    Thank you, Sörös and China.

  2. makati1 on Fri, 9th Oct 2020 7:56 pm 

    Nice Theedrich! Sarcasm with a smile, and not far off the mark.

  3. makati1 on Fri, 9th Oct 2020 7:58 pm 

    BTW: China took advantage of oil’s “Blue Light Special” and stocked up. Now it will wait for the inevitable next B.L.S. to restock. Not stupid, like the US

  4. ANSEL RAPIST this is what supertard wrote on Fri, 9th Oct 2020 8:13 pm 

    full of supremacist muzzie lovin

    Capitalist Cult of The Car

    You wake up early everyday
    To commute to a faraway place
    Which for all intents and purposes
    Could best be described as:
    “The Height of Tedium”.

    You climb the corporate ladder
    High enough to afford a new vehicle
    The company cafeteria offers donuts
    And co-workers congratulate you
    With warm welcoming smiles.

    That’s how we here survive
    While economies elsewhere take a dive.
    Feeling blue? Fill the tank up for a drive!
    Another war wins fuel for us to thrive
    Don’t think, just work — from nine to five.

    Not sure whether or not evolution
    Would have wanted it this way?
    Repetitive stress makes a fine mess
    Within this vicious cycle of duress
    But whatever the case, dress to impress!

  5. Davy on Fri, 9th Oct 2020 8:25 pm 

    “BTW: China took advantage of oil’s “Blue Light Special” and stocked up. Now it will wait for the inevitable”

    What a dumbass. China has taken a hair cut stocking up on expensive oil before Covid. That is on top of the Venezuela haircut. Talk about poor business people. The BRI will be a further loss with the decline of globalism.

  6. ANSEL RAPIST every one please respect ozark goat on Fri, 9th Oct 2020 9:00 pm 

    only master race chink can harvest master cult muzz

  7. I AM THE MOB on Sat, 10th Oct 2020 3:00 am 

    New Normal?

    More like new “North Korea”

    A fucking hell hole is what America is. A fucking nightmare you can’t escape. I would rope. But I know the cunts at the hospital would count me as death by COVID. and I ain’t gonna give them their fake fucking numbers.

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