Based on tracking data for oil imports and exports from Oil Price, Chinese refineries are looking to increase their imports of crude oil early this year, given that Brent crude prices are currently below $80 per barrel. This anticipation is driven by the expectation of a significant surge in fuel demand towards the end of 2024.
Brent crude has been trading under $80 per barrel since December, following its decline from the peak of $95 in September 2023.
In the beginning of this month, China issued substantial import quotas for crude oil to refineries for the entire year of 2024. The subsidy levels were increased to around 60%, and specific quotas were allocated to various refineries. As a result, refineries are actively seeking to stockpile crude oil priced below $80 early this year, foreseeing a substantial increase in fuel demand in the latter part of the year.
An industry analyst noted, “They are taking oil from all over the world, except the United States due to high shipping costs”.
Currently, U.S. crude oil is comparatively more expensive for Asian refineries than that from Middle Eastern producers. Consequently, Asian buyers are shifting their preferences towards acquiring more crude oil from the Middle East. This trend is particularly evident after Saudi Arabia, reduced the price of February-delivery crude in Asia by an additional $2 per barrel, surpassing the standard Oman/Dubai crude by $1.5 per barrel. This represents the narrowest differential for Saudi crude compared to Oman/Dubai in the past 27 months, dating back to November 2021.
It is premature to evaluate China’s oil demand for 2024 due to economic uncertainties in the past year. Nonetheless, China has experienced a surge in crude oil imports in early 2024, bolstering global oil prices despite subdued demand.
In 2023, China imported a record-high of nearly 564 million tons of crude oil, equivalent to 11.28 million barrels per day. This reflects an 11% increase from 2022 and surpasses the previous peak of 10.81 million barrels per day in 2020, as reported by Chinese Customs. The upswing in oil imports is attributed to the reopening of the economy following the Covid-19 pandemic.
The escalation in import volumes is not the sole noteworthy aspect. China’s domestic crude oil production also attained a record level last year, totaling 208 million tons, a 3 million ton uptick from the previous year, with an average daily output of 4.2 million barrels.
Additionally, China’s exports of refined oil products reached an unprecedented level from 2019 to the present, amounting to about 2.69 million tons, or approximately 1.37 million barrels per day. This marks a 16.7% increase from 2022. The surge raises concerns about the demand for refined fuels beyond China, especially in Europe, which has imposed sanctions on Russian crude oil and fuel, prompting an urgent quest for alternative solutions.
According to Oil price
By. Pham Thanh Bien
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