Crude imports in the world’s most important oil-buying region, Asia, slumped to a two-year low in July amid weak demand in the largest regional buyers – China and India.
While slower imports in India, the world’s third-biggest crude importer, can be attributed to seasonality and lower demand in the monsoon season, Chinese consumption has disappointed oil bulls so far this year and has the market concerned about demand in the second half amid weaker economy, the ongoing property crisis, and tepid fuel demand.
In July, Asia’s crude oil imports slumped to the lowest level on a daily basis since July 2022. The region’s total crude arrivals are estimated at 24.88 million barrels per day (bpd) last month, down by 6.1% compared to June, according to data from LSEG Oil Research cited by Reuters columnist Clyde Russell.
Crude oil imports so far this year have also tracked lower compared to the same period of 2023—at an average of 26.78 million bpd for January to July, Asian oil imports fell by 340,000 bpd compared to the first seven months of last year, the data showed.
While demand in India typically falls in the monsoon season from July to September, the faltering demand and lower crude imports in China result from weaker economic growth and lackluster fuel demand below expectations.
Chinese crude oil imports are on track for a decline of 2.1%, or 240,000 bpd, for January to July versus a year earlier if official data for July—released next week— shows import figures close to LSEG Oil Research’s estimate of just 10.53 million bpd for July imports.
The apparent weaker demand and the slowing imports in China have been the biggest drags on oil prices in recent months, often overshadowing tensions in the Middle East and a recent drop in commercial crude inventories in the United States.
The latest official data showed that China’s crude oil imports slumped by 11% in June from a record high in the same month of 2023 amid tepid fuel demand and lower run rates at independent refiners. In the first half of 2024, crude arrivals also dropped, by 2.3% compared to the first half of last year, according to data from China’s General Administration of Customs.
The property crisis in China and weaker-than-expected fuel demand have weighed on refining margins in recent months, prompting independent Chinese refiners to reduce crude throughput.
Refinery output in the world’s top crude oil importer dropped by 3.7% in June compared to the same month last year and hit the lowest level so far this year.
China’s apparent oil demand is likely to have slumped by 8.1% year-over-year to about 13.7 million bpd in June, according to Bloomberg calculations.
Moreover, China’s GDP growth was 4.7% in the second quarter, below expectations of 5.1%.
Earlier this month, a supertanker-load of one of the key North Sea crudes sold in Asia at a very low price—below the spot North Sea price and below the price of a Middle Eastern grade—in a sign that Asian demand for crude continues to be softer than anticipated.
As things stand more than halfway through the year, the International Energy Agency (IEA) could be closer to pinpointing China’s oil demand than OPEC, which continues to hold an optimistic view of 2.2 million bpd global demand growth this year, driven by China.
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In its July monthly report, the IEA said that underwhelming Chinese consumption is inhibiting global oil demand growth.
“Oil consumption in China, long the engine of global oil demand growth, contracted in both April and May, and is now assessed marginally below year earlier levels in 2Q24,” the Paris-based agency said, adding that Chinese demand for industrial fuels and petrochemical feedstocks was particularly weak.
By Tsvetana Paraskova for Oilprice.com
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There must be other explanations and I will offer two possible ones. One is that the global oil market is waiting to see what OPEC+ reaction will be. Will it decide to add more cuts or extend the current ones beyond September?
The other explanation is heavy manipulation of the market by the United States pumping big volumes of SPR oil to depress oil prices for the benefit of its economy aided by the IEA, speculators and oil traders particularly in a presidential elections' year.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert