A red flag for oil? China's raw consumption is false
China introduced a fresh monthly import of crude oil in April and continues to import growing volumes of crude oil this year, expecting to estimate two-thirds of global demand growth in 2019.
Nevertheless, a rough estimate of Chinese consumption patterns in that The latest evidence suggests that the US and China trade war has hit China's industries, and nearly half of the increase in crude imports has been in retention so far this year, according to Reuters columnist Clyde Russell, who provides an interesting perspective on whether China's strong crude oil imports adequately reflect what is happening to the Chinese economy.
Signs point to a decline in China's economic growth, while high-level storage so far this year may slow down later in 201[ads1]9 if oil prices rise to a level that Beijing considers high to build stocks in today's pace.
China hit a new monthly record of 10.64 million bpd in crude oil imports this April, which refiners jumped to fill up with Iranian oil before the US removed sanctions. Subsequently, China's crude oil imports came in May from the monthly record in April, when Chinese refineries drastically reduced Iranian oil imports after the end of US dispensations, and some state refineries were offline for scheduled maintenance.
China's headline number Imports of crude oil suggest that imports from the first half jumped by 8.8 percent from the same period last year, or by about 800,000 bps, according to estimates from Reuters & # 39; Russell.
This growth accounts for most of the world's estimated growth in oil demand this year, which is now linked to 1.1 million bpd-1.2 million bpd by OPEC, EIA, and the International Energy Agency (IEA). Related: OPEC: Oil and gas is part of the solution to climate change
But China is believed to have accelerated the introduction of raw material into commercial or strategic storage, while also having increased refined oil product exports This year, which means it may have had much less growth in the actual domestic oil demand.
The crude oil supply in China, including imports and domestic production minus refinery consumption, suggests that between January and May China put 1.21 bpd in either commercial or strategic storage, compared to 850,000 bpd stored in the same period last year, according to Russell's estimates. .
China does not provide data on storage, so this is just an estimate, but this estimate suggests that China accelerated storage this year, with 45 percent of raw import growth on its way to storage.
Add to this increased fuel exports, and China's actual crude consumption growth may have only 340,000 bpd in H1 2019, Russell argues.
Earlier this year, the data from Wells Fargo Securities showed that China's diesel consumption fell by 14 percent in March and 19 percent in April, to its lowest levels in a decade. 19659002] "We believe that accelerated decline is most likely related to economic factors and the impact of the" war "tariff with the United States," cites CNBC Wells Fargo energy analyst Roger Read as said in a note at the end of May. [19659002] Lastly, BlackRock, the world's largest asset management company, said that the Chinese economy is a "lull" because of the commercial war that has become the only major driver in global economy and markets. According to BlackRock, investors are "too optimistic" that China's stimulus measures could boost economic growth, says the South China Morning Post property manager.
"We believe that China's GDP should avoid falling below 6% targets, but some industries, especially export-related, will be harmed, and jobs and wages cannot remain as stable even though GDP does," says Iris Pang, ING Economist , Greater China, last week. Related: Major Blackout Threatens Venezuelan Oil Production
Apart from the wobbling economy, China's crude oil demand, and possibly imports, could be pulled down in the short term by refineries who Reduces refinery in the third quarter as massive refinery start-up and lowering domestic demand for fuel has created a fuel glut in the country and harms refining margins.
According to JLC International, Sinopec ZRC will cut daily crude consumption by 2.17 percent while Tianjin Petrochemical is set to Reduce their daily crude stations by 5.12 percent in July
So far this year, China has shown robust oil import growth, but the actual industrial and industry Either consumption may have been much lower than the headline figure suggests. Still, if China reduces its raw material price if oil prices rise, crude oil imports may flash a warning sign to the oil market that the world's largest oil importer sees a significant drop in raw demand growth.
By Tsvetana Paraskova for Oilprice.com
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