LONDON, May 23 (Reuters) - China’s petroleum trade has disappointed bulls hoping for a rebound at the start of the year to tighten global crude inventories, which helps to explain why benchmark oil prices have fallen progressively since late January.
Crude imports amounted to 179 million tonnes in the first four months of 2023, broadly in line with 171 million tonnes in the same period in 2022 and 180 million tonnes in 2021.
Crude imports in the first four months have increased at a compound rate of 3.4% per year since 2018, according to the General Administration of Customs.
Imports increased by +4.6% in 2023 but after declining by -4.8% in 2022 and far slower than the growth of +7.1% in 2021.
China’s refiners are price-sensitive buyers, but they appear to have had plentiful inventories, limiting the need to increase imports despite the retreat in prices since mid-2022.
Chartbook: China's petroleum trade
The country’s refining system is primarily configured to satisfy internal demand for transport fuels and petrochemicals - with much of the business subject to price controls.
But both the major state-owned firms and privately-owned independent refineries export fuels and chemicals to dispose of any surplus and earn higher returns.
Exports of gasoline, jet and diesel are controlled through a system of quotas administered by the Ministry of Commerce.
Reduced quotas and exports between the middle of 2021 and the middle of 2022 depleted fuel inventories, especially distillates, globally.
China’s export slowdown removed around 16 million tonnes of refined products from the global market, with diesel accounting for essentially all of the cut.
Quotas were raised at the end of the third quarter of 2022 and more were issued for the first quarter of 2023.
Many analysts anticipated exports would rise significantly helping to rebuild depleted global inventories of gasoline and especially diesel.
But refined product exports remained modest at 22 million tonnes in the first four months of 2023, up from 15 million tonnes in 2022 but below 25 million tonnes in 2021.
Diesel exports were less than 7 million tonnes, up from under 2 million tonnes in 2022, but well below 9 million tonnes in 2021.
The subdued rebound in diesel exports has kept global inventories tighter and crack spreads stronger than seemed likely at the start of the year, despite the downturn in the business cycle across North America and Europe.
- Hedge funds bearish on crude, more bullish on cracks (May 22, 2023)
- U.S. refinery margins set to remain high (May 19, 2023)
- Low US fuel stocks support prices and cracks (May 16, 2023)
John Kemp is a Reuters market analyst. The views expressed are his own
Editing by Barbara Lewis
Our Standards: The Thomson Reuters Trust Principles.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
John Kemp is a senior market analyst specializing in oil and energy systems. Before joining Reuters in 2008, he was a trading analyst at Sempra Commodities, now part of JPMorgan, and an economic analyst at Oxford Analytica. His interests include all aspects of energy technology, history, diplomacy, derivative markets, risk management, policy and transitions.