China has been purchasing large amounts of U.S. crude oil recently, possibly to fulfill the energy import quotas it reached with the United States last year, or to enjoy the ultra-low price of U.S. crude oil. But the buying frenzy is coming to an end.
Refinitiv data from Reuters shows that China’s daily oil imports may reach 867,000 barrels this month alone, while oilfield services company Canary’s data puts it at 900,000 barrels. Reuters’ Clyde Russell wrote this week that U.S. oil exports to China will decline sharply. The reason is simple but worrying.
Since July, U.S. crude oil entering China has been bought in April, May, and June, reaching a record high in terms of quantity. The average production in one day in July alone is more than It increased by 139% during the same period last year. This was purchased when West Texas Intermediate crude oil prices were at multi-year lows. Russell pointed out that by June of this year, it had returned to around $40, so purchases since then have been smaller.
But what is worrying is: the recovery in oil prices since the spring of this year is largely due to China’s continuous increase in imports, including Imported from the United States. Traditionally, rising imports have been thought to mean rising demand, but that’s not entirely true this time around. Chinese refiners have been stockpiling crude oil because crude prices are at historic lows, not to meet growing demand.
To be fair, it is recognized that China’s oil demand recovered very quickly after the blockade ended, but China is not An isolated economy whose refining industry needs Asia and the rest of the world to recover as well, but that recovery will be slow. Now, as OPEC warns, a second wave of COVID-19 infections, such as is already visible in parts of Europe, will further slow the demand recovery, which will inevitably affect China’s oil imports.
However, according to Canary CEO Dave Eberhart, China will continue to buy large amounts of US oil ahead of the US election. Eberhardt wrote in Forbes that China wants to be on Trump’s side as much as possible in the event that Trump is re-elected. Reuters’ Russell takes a different view: Citing preliminary import estimates, he believes U.S. crude oil flows into China will fall sharply to 500,000 barrels per day in October, with further reductions in November. For Russell, the most important thing is price. But for Eberhardt, it’s also about politics and the trade war.
Eberhard wrote: “While importing U.S. crude oil generally does not make business sense for Chinese refiners, The Chinese government has instructed them to continue buying as the election approaches – suggesting China knows trade problems will only intensify if Trump is re-elected.”
However, not everyone thinks politics will trump the economy. In fact, data from China’s market research firms show that private refiners, even if they are not state-owned oil majors, are likely to slash foreign oil imports this month and next. After all, storage space is limited, and Chinese energy companies have been consuming storage space for months, and while demand conditions have been improving, they are still not rising, even as China’s economy turns around.
The current mainstream view seems to be that China will reduce oil imports from the United States and other countries in the next few months, mainly This is due to lower refinery operating rates. Earlier this week, Reuters reported that refineries would cut output by 5% to 10% early this month due to a glut of crude oil and weak fuel export margins. This means there will be more pressure on prices. That’s not all. Some analysts expect China may start selling the oil it bought cheaply this spring, which would be bad news for oil prices. </p
