Oil traders’ eyes turn to China after US data
JEDDAH: For the past few months, the market was too focused on supply-side developments as traders followed developments in the US market on two topics mainly, the amount of oil in inventories and the outlook for production.
Since the end of last week, the market started to look at the demand side again and this time the focus was on China, which is now expected to have robust growth in oil demand. There are three factors to support this, namely China’s fall in output, a rise in imports, and strong refinery crude runs.
1) China may import more crude this year as low oil prices are not helping Chinese oil producers to pump enough oil to meet local demand, while the cost of oil imports is falling. The country’s oil production this year might be the lowest since 2009, Bloomberg reported on July 17. Output in the first six months of this year fell 5.1 percent from the same period last year to average 3.91 million barrels per day (bpd), according to Bloomberg calculations based on data released on July 17 from the National Bureau of Statistics (NBS). Oil production in June alone rose 3.1 percent to
3.96 million bpd from a month earlier.
2) Chinese customs data showed that the world’s secondlargest consumer of crude oil imported 8.55 million barrels of oil daily on average during the first six months of the year, or 212 million tons in total, signaling a 13.8 percent increase from the same period a year ago. In May alone, Chinese refiners imported 37.2 million tons of crude or 273 million barrels. This was up 15.4 percent from May 2016, and the second-highest monthly import rate on record. The growth in imports comes on the back of higher refinery runs after a maintenance period, as well as dwindling local crude production.
3) China’s refinery activity indicates strong fuel demand. Chinese refineries increased crude throughput in June to the second highest on record, with some independent plants raising output even as state oil majors prepare to take drastic steps to cut production during the peak summer season. Throughput last month hit 46.08 million tons, or 11.21 million bpd, a 2.3 percent rise from a year ago and up from May’s 10.98 million, data from the NBS showed on July 17. The number was just short of December’s record high of 11.26 million bpd.