By Clyde Russell
LAUNCESTON, Australia (Reuters) – China increased the pace at which it added crude to its stockpiles in March, as the world’s largest oil importer bought record imports from Western-sanctioned Russia.
A total of 790,000 barrels per day (bpd) were added to China’s commercial or strategic stocks in March, compared with 570,000 bpd in the first two months of 2024, according to Reuters calculations based on official data.
Over the first quarter as a whole, China increased its inventories by 670,000 b/d, a figure that to some extent challenges the prevailing market view that Chinese oil demand is strong.
This is especially true since Chinese crude imports were actually slightly lower in the first quarter of this year, at 11.02 million b/d, compared to 11.06 million b/d for the same period. period in 2023.
China does not disclose the volumes of crude entering or leaving strategic and commercial stocks, but an estimate can be made by deducting the quantity of crude processed from the total crude available from imports and domestic production.
Total crude available to refiners in March was 15.88 million b/d, comprised of imports of 11.55 million b/d and domestic production of 4.33 million b/d.
The volume of crude processed by refiners was 15.09 million b/d, leaving a surplus of 790,000 b/d to be added to storage tanks.
For the first quarter, total available crude was 15.31 million b/d, while refinery throughput was 14.64 million b/d, leaving a surplus of 670,000 b/d.
The picture emerging from the first quarter is that Chinese demand for imported crude oil has remained mostly stable and refiners continue to add to their inventories even as prices begin to rise.
It is worth noting that crude landed in China in March was likely distributed between late December and early February, a period when crude prices were still below their 2023 highs and had not yet begun their recent rally.
Benchmark Brent crude futures fell to $72.29 a barrel on Dec. 13, the lowest since June, after following a downward trend since hitting a 2023 high of $97.06, hitting the September 27.
Since the December low, Brent initially held in a wide range around $75-85 per barrel, before rebounding from mid-March to reach a 2024 high of $92.18 on April 12, amid continued concern over an escalation of tensions in the Middle East resulting from escalating tensions in the Middle East. the conflict between Israel and Hamas.
Brent crude closed at $87.42 a barrel on Wednesday, after Chinese economic data showed the economy grew more than expected in the first quarter, but other indicators, such as real estate investment, retail sales and industrial production remained weak.
The question for the market is whether the Chinese economy is on the path to recovery and whether oil demand will therefore improve in the coming quarters.
And even if demand for crude picks up, will China buy more from the maritime market even though prices have increased, or will it turn to the inventories it built in the first quarter.
RUSSIAN OIL
Although Chinese refiners do not disclose the quality or origin of the crude added to their stocks, it is likely that Russian oil is one of the main types stored.
Chinese imports from Russia in March were 1.51 million b/d from the sea market and 890,000 b/d via pipeline, for a combined total of 2.4 million b/d, according to data compiled by LSEG Oil Research.
This is up from 2.19 million b/d in February and is the highest level of imports from Russia since China stepped up purchases following Moscow’s invasion of Ukraine in February 2022, which led to cuts in Russian crude as Western countries imposed sanctions.
In contrast to higher arrivals from Russia, Chinese imports from its former main supplier Saudi Arabia fell to 1.59 million bpd in March, the lowest since December, according to LSEG.
The shift to Russian crude supports the idea that Chinese refiners are maximizing their imports of cheaper grades, which also include oil from Iran and Venezuela.
The opinions expressed here are those of the author, a Reuters columnist.
(Edited by Lincoln Feast.)
