Major oil exporters clearly would like higher crude prices and may even be getting closer to some sort of coordinated action, but they should be careful what they wish for as they may choke off demand growth in top importer China.
On the surface, China’s appetite for imported crude has seen robust gains this year, rising 13.5 percent in the first eight months to 250.45 million tonnes, equivalent to about 7.49 million barrels per day (bpd).
August was a particularly strong month, with imports the second highest on record in tonnes and the strongest since April on a barrels per day basis.
But it’s likely that the surging imports are a result of lower crude oil prices, rather than because of any sustained lift in actual fuel consumption in the world’s second-largest economy.
This assumption can be made because it appears much of the extra crude being imported is going straight into strategic and commercial storage, or being re-exported as refined fuels.
The Chinese have a track record of buying for stockpiles when they deem prices to be cheap, and it appears they have accelerated inventory building this year.
The simplest way to get an idea of how much oil is flowing into storage is to add together China’s crude imports and domestic production, and then subtract the amount of oil being processed by refineries.