t’s tempting to view the growth in China’s crude oil imports this year as mainly a result of increased strategic stockpiling, but that overlooks the rising importance of refined product exports.
The stockpiling matters to crude oil markets as every barrel put into storage is ultimately positive for demand, as that barrel is effectively consumed insofar as it is taken out of the market.
However, every barrel refined in China and exported as fuel is simply a barrel that isn’t bought elsewhere, as Chinese exports compete and replace fuel produced in other refining centers, such as India, Singapore and the Middle East.
China’s crude oil imports were 6.65 million barrels per day (bpd) in November, taking the year to date level to 6.61 million bpd, up 8.7 percent on the first 11 months of 2014. [nL3N13W3I6]
However, product exports were a record 4.1 million tonnes in November, the first time they’ve been above the 4-million tonne mark. [nZZN07MB15]
Product exports in November were around 1.09 million bpd, based on the BP conversion factor of 8 barrels per tonne of product.
This took total product exports to 31.83 million tonnes for the first 11 months of the year, a jump of 18.6 percent over the same period in 2014 and equating to about 762,400 bpd.
More importantly, product exports are on a rising trend since the middle of the year, having been above 3 million tonnes every month since June, after averaging 2.34 million tonnes a month in the January to May period.
This implies that a rising share of China’s crude imports will simply be exported as refined fuel, especially when the changes being instituted by Beijing are taken into account.