China crude imports forecast cut sharply
Analysts do not foresee a notable rise in China’s crude oil purchases before the end of the year, given that barrel prices have climbed past $100 per barrel. The latest data indicate that September imports are projected to be roughly equal to August’s volume as measured in barrels today.
Cargoes arriving in September were purchased when oil prices were in the $80 range, prior to the early September surge that pushed Brent crude above $100 per barrel. China’s crude oil imports increased for the second straight month in August, as refiners sought alternative non-Middle Eastern sources and increased overseas fuel exports due to relaxed restrictions.
Despite the August increase, imports were still 23.4% lower than the previous year, though significantly higher than the June low of 7.1 million barrels per day. In June, China’s crude oil imports hit a decade-long low, capping three months of reduced imports due to high prices and limited Middle Eastern supply.
FGE NexantECA and Energy Aspects analysts have reduced their fourth-quarter forecasts for China’s crude oil imports by approximately 400,000 barrels per day. Their revised estimates now range between 9.2 and 9.3 million barrels per day, a substantial decrease from last year’s average of 11.6 million barrels per day.
According to Samuel Kong, a senior oil analyst at FGE NexantECA, China’s crude imports are unlikely to see significant growth. This is partly due to high premiums and freight costs increasing feedstock expenses and reducing profit margins. Chinese state-owned companies are hesitant to purchase large volumes of crude at prices above $100 per barrel, especially with record-high freight costs.
The outlook for the remainder of the year has worsened as oil prices surpass $100 per barrel and the U.S. blockade cuts off the affordable supply that Chinese independent refiners have long relied on to stay competitive. These smaller refiners may begin to reduce their processing rates as oil prices rise and supply from key exporters like Venezuela and Iran diminishes.
China’s independent refiners will likely continue to face challenges in the coming months, given the high oil prices and limited supply. FGE NexantECA and Energy Aspects analysts anticipate that China’s crude oil imports will remain relatively stable, with no significant increase expected through the end of the year.
