Crude oil arrivals in the world’s top-importing region, Asia, appear to have rebounded in August from a two-year low in July.
China, the world’s largest crude importer, is estimated to have boosted August imports by more than 1 million barrels per day (bpd) from July, while the other big importers in Asia – India, South Korea, and Japan – also saw imports rising from the low levels in July, according to data from LSEG Oil Research cited by Reuters columnist Clyde Russell.
The rebound in Asia’s imports could be attributed in part to seasonal demand patterns, as importers tend to increase purchases during the third quarter to stockpile fuel for peak winter demand.
But part of the recovery in imports could be attributed to the lower oil prices, with August cargoes likely contracted in early June, when Brent Crude prices slumped to $76-$77 per barrel.
With China’s apparent oil demand weaker than expected, the lower international prices may have played a bigger role in Chinese purchases for August.
Going forward, the key question for Asian and Chinese imports is whether the strengthened oil prices in early July, when Brent topped $85 per barrel, put off refiners from boosting purchases for September. This remains to be seen in the next month or two. Whether China and the rest of the major importers in Asia will sustain the estimated rebound in imports in August will be one of the main drivers of oil prices for the rest of the year.
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In August, Asia is estimated to have imported 26.74 million barrels per day (bpd) of crude oil, up by 2.18 million bpd from July’s two-year-low levels, data from LSEG Oil Research showed.
In July, Asia’s crude oil imports slumped to the lowest level on a daily basis since July 2022. While slower imports in India, the world’s third-biggest crude importer, were 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 a weaker economy, the ongoing property crisis, and tepid fuel demand.
This week, the first-half earnings report of the largest refiner in Asia, China Petroleum and Chemical Corporation, confirmed market concerns about weak fuel demand in China.
Sinopec, or China Petroleum and Chemical Corporation as it is officially known, reported a first-half net profit that rose 1.7% year-over-year, thanks to increased domestic crude oil and natural gas production and rising international oil prices.
But the refining metrics of the largest refiner in Asia by capacity all deteriorated compared to the first half of last year, reflecting weak Chinese demand—especially for diesel—that has been spooking the markets this year.
Sinopec flagged “severe challenges brought by the weak market demand and narrowing margin of certain products” in the first half of the year.
For August, LSEG Oil Research puts China’s crude oil imports at 11.02 million bpd, up from 9.97 million bpd for July, per official Chinese customs figures.
The higher imports in August may have been more influenced by the lower oil prices at the beginning of June than a turnabout in Chinese oil demand.
So far this year, China’s commodity imports have been heavily dependent on the prevailing international prices of major energy commodities.
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Chinese purchases of LNG, coal, copper, and iron ore jumped in the first half of the year compared to year-ago levels despite a continued property crisis and a faltering economy. During the first half of 2024, China’s imports of crude oil, natural gas including LNG, coal, iron ore, and copper appear to be inversely correlated with the price trends of these commodities on international markets.
It’s no secret that China prefers to buy its crude as cheaply as possible—one of the reasons it’s now a key customer of Russia’s crude, which is embargoed in the West.
By Tsvetana Paraskova for Oilprice.com
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Moreover, China's rising demand by 1.0 million barrels a day (mbd) in August belies Western media claims about a slowing down economy and a decline in Chinese crude oil imports. China's economy is growing at 5% this year, the highest among the major economies with the exception of India growing at 6.8%.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert