China’s crude imports in July down due to weak demand and high stocks

Rising domestic stocks in China continued, resulting in lower crude oil imports despite a rebound in crude refining. China’s domestic commercial and emergency crude stocks soared to a historic peak in order to cope with the changing situation in Iran. On the other hand, weak oil demand caused by the economic downturn decreased crude refining volume at domestic refineries.
It is forecast that China’s economic slowdown is not likely to ease up in the third quarter of 2012, and limited refining and high stocks will continue to curb China’s crude imports in the second half of this year.
While crude oil imports slightly increased, crude refining growth did not rise correspondingly, which means that China’s crude oil stocks continued to increase. Crude oil imports from Iran decreased by 22% year-on-year, making Iran the only exporter whose exports to China declined. This was mainly because contract negotiations at the beginning of this year ended in a deadlock. The sanctions applied by the U.S. to banks, insurance companies, and shipping companies doing business with Iran also negatively affected Iran’s crude exports to China, and the trend is unlikely to change.
China also imports crude from Libya, Angola, and Venezuela, and may resume crude exports to Sudan when the freight dispute between north and south Sudan is resolved.
Economic downturn depresses oil market and imports
The cost, insurance and freight (CIF) of imported crude oil dropped from US$901 per ton in April to US$ 726 per ton in July. Domestic refineries barely managed to consume the expensive imported crude, which aggravated refining losses in the second quarter of 2012, coupled with two retail price cuts on oil products in May and June by China’s National Development and Reform Commission (NDRC).
Although oil prices were subsequently raised in August and expected to further rise in September, which may boost domestic purchase demand, there is no indication of higher demand by terminal users. (September 17, 2012)