Passed the peak? China's crude oil imports trend down: Russell
The opinions expressed here are those of the author, a columnist for Reuters.
By Clyde Russell
LAUNCESTON, Australia, Aug 22 (Reuters) -Is it time to ask whether China's crude oil imports have peaked?
The world's biggest oil importer brought in record volumes last year, a feat that seems unlikely to be repeated in 2024 given the decline in arrivals in the first seven months.
The market consensus so far, though, is that the weakness in 2024 is temporary and China's import of crude oil will resume an upward trend as soon as the world's second-largest economy regains momentum.
But what if there are structural changes to China's oil demand that could alter the trajectory of its fuel consumption going forward?
PARADIGM SHIFT?
China's oil imports rose for 19 straight years from 2001, when they were just 1.2 million barrels per day (bpd), to 2020 when they hit 10.85 million bpd, the second-highest total on record.
While volumes then declined for two years, largely due to China's strict Covid-19 lockdown measures, crude imports hit an all-time high of 11.29 million bpd in 2023.
But in the first seven months of 2024, arrivals fell to 10.90 million barrels per day (bpd), some 320,000 bpd below the level for the same period last year.
This weakness has likely been driven, in part, by several structural changes altering the dynamics of China's fuel consumption.
These factors and a few other burgeoning structural changes have the potential to curtail the rise of China's crude oil imports now and for the foreseeable future.
KEY DRIVER
Perhaps the biggest factor that may weigh on crude oil imports in 2024 and the coming years is China's transition to what it calls new energy vehicles (NEVs), which include fully electric cars and trucks and hybrids.
Sales of passenger car NEVs exceeded those with internal combustion engines (ICE) in July for the first time, according to data from the China Association of Automobile Manufacturers.
Sales of passenger NEVs in July were 853,000, representing 53.5% of total auto sales of 1.595 million.
China is also encouraging consumers to switch from older, less efficient vehicles to NEVs or more efficient ICE cars. This month Beijing announced an enhanced trade-in programme that will offer payments of 20,000 yuan ($2,805) to anyone scrapping an older car and replacing it with an NEV.
This subsidy is designed to remove more gasoline and diesel cars from the road and replace them largely with electric vehicles, of which China is the world's largest producer.
LNG HITS DIESEL
China's diesel demand is also softening. The U.S. Energy Information Administration reported that it dropped by 11% in June from the same month in 2023 to 3.9 million bpd.
This is due to two factors: the slowdown in construction and the switch to LNG in trucks.
While it's possible that construction, and China's economic activity more generally, may recover in the coming months, it's also likely that the trend towards using LNG in trucks will accelerate.
Last year 8% of road diesel demand, or about 220,000 bpd, was displaced by LNG, according to a report by consultants Wood Mackenzie.
The move to LNG trucks has been sped up by the decline in LNG prices at a time when diesel prices have been kept relatively high by elevated oil prices, supported by output cuts from major exporters in the OPEC+ group.
LIMITING FACTORS
China may also wind back the purchase of crude oil for strategic stockpiles in coming years, given the market view that the country has reached or is near its desired target for these reserves.
China is also building fewer new refineries in line with Beijing's plan to cap capacity at 20 million bpd, compared with existing capacity of around 18.5 million bpd.
Refineries are already struggling to use their capacity efficiently, with only 13.91 million bpd processed in July, the lowest volume since October 2022.
For the first seven months of the year, refineries processed 14.37 million bpd, down 1.2% from the same period in 2023.
Another factor likely to limit future imports is China's domestic oil production, if the country is successful in maintaining or increasing this activity.
Domestic oil production rose by 2.1% over the January to July period to 4.28 million bpd. While this is a modest gain, it shows that some imports are being displaced.
It should also be noted that Beijing is likely very keen to lower crude imports, partly to cut its import bill, but also to lessen reliance on imported fuel that has historically been subject to sharp price swings and threats of supply disruptions.
China would rather move rapidly to using electricity in its transport system, even if a majority of that power is generated from more polluting coal.
OTHER SIDE OF THE SCALE
It's clear that there are several factors that may limit the need for rising crude imports, but are there any that point to increased oil demand?
The strongest is the potential for China's economic growth to accelerate markedly, which would thereby boost diesel demand for transport, manufacturing and construction.
China's refineries could also secure higher quotas to export refined products and lift crude imports to boost fuel output.
But, importantly, the trends that could potentially boost crude imports are largely speculative. The factors limiting the need for additional crude imports are already in place and likely to accelerate.
The opinions expressed here are those of the author, a columnist for Reuters.
GRAPHIC-China crude oil imports vs domestic output https://tmsnrt.rs/3T2En3p
Editing by Anna Szymanski and Tom Hogue
Τελευταία νέα
Δήλωση αποποίησης ευθύνης: Οι οντότητες του ομίλου XM Group παρέχουν υπηρεσίες σε βάση εκτέλεσης μόνο και η πρόσβαση στην ηλεκτρονική πλατφόρμα συναλλαγών μας που επιτρέπει στον ενδιαφερόμενο να δει ή/και να χρησιμοποιήσει το περιεχόμενο που είναι διαθέσιμο στην ιστοσελίδα μας ή μέσω αυτής, δε διαφοροποιεί ούτε επεκτείνει αυτές τις υπηρεσίες πέραν αυτού ούτε προορίζεται για κάτι τέτοιο. Η εν λόγω πρόσβαση και χρήση υπόκεινται σε: (i) Όρους και προϋποθέσεις, (ii) Προειδοποιήσεις κινδύνου και (iii) Πλήρη δήλωση αποποίησης ευθύνης. Ως εκ τούτου, το περιεχόμενο αυτό παρέχεται μόνο ως γενική πληροφόρηση. Λάβετε ιδιαιτέρως υπόψη σας ότι τα περιεχόμενα της ηλεκτρονικής πλατφόρμας συναλλαγών μας δεν αποτελούν παρότρυνση, ούτε προσφορά για να προβείτε σε οποιεσδήποτε συναλλαγές στις χρηματοπιστωτικές αγορές. Η πραγματοποίηση συναλλαγών στις χρηματοπιστωτικές αγορές ενέχει σημαντικό κίνδυνο για το κεφάλαιό σας.
Όλο το υλικό που δημοσιεύεται στην ηλεκτρονική πλατφόρμα συναλλαγών μας προορίζεται για εκπαιδευτικούς/ενημερωτικούς σκοπούς μόνο και δεν περιέχει, ούτε θα πρέπει να θεωρηθεί ότι περιέχει συμβουλές και συστάσεις χρηματοοικονομικές ή σε σχέση με φόρο επενδύσεων και την πραγματοποίηση συναλλαγών, ούτε αρχείο των τιμών διαπραγμάτευσής μας ούτε και προσφορά ή παρότρυνση για συναλλαγή οποιωνδήποτε χρηματοπιστωτικών μέσων ή ανεπιθύμητες προς εσάς προωθητικές ενέργειες.
Οποιοδήποτε περιεχόμενο τρίτων, καθώς και περιεχόμενο που εκπονείται από την ΧΜ, όπως απόψεις, ειδήσεις, έρευνα, αναλύσεις, τιμές, άλλες πληροφορίες ή σύνδεσμοι προς ιστότοπους τρίτων το οποίο περιέχεται σε αυτήν την ιστοσελίδα παρέχεται «ως έχει», ως γενικός σχολιασμός της αγοράς και δεν αποτελεί επενδυτική συμβουλή. Στον βαθμό που οποιοδήποτε περιεχόμενο ερμηνεύεται ως επενδυτική έρευνα, πρέπει να λάβετε υπόψη και να αποδεχτείτε ότι το περιεχόμενο δεν προοριζόταν και δεν έχει προετοιμαστεί σύμφωνα με τις νομικές απαιτήσεις που αποσκοπούν στην προώθηση της ανεξαρτησίας της επενδυτικής έρευνας και ως εκ τούτου, θα πρέπει να θεωρηθεί ως επικοινωνία μάρκετινγκ σύμφωνα με τους σχετικούς νόμους και κανονισμούς. Παρακαλούμε εξασφαλίστε ότι έχετε διαβάσει και κατανοήσει τη Γνωστοποίησή μας περί Μη ανεξάρτητης επενδυτικής έρευνας και την Προειδοποίηση ρίσκου όσον αφορά τις παραπάνω πληροφορίες, τις οποίες μπορείτε να βρείτε εδώ.
