China’s crude oil imports are expected to rebound in January as demand from independent refiners will accelerate once 2018 import quotas are in place, and processors start to replenish inventories, analysts and trade sources said.
China’s crude imports are expected to rise to another record in 2018 as new capacities are brought online and Beijing allows more independent refiners to import crude.
Robust demand growth in the world’s largest crude importer – China having overtaken the United States this year – is also helping to support global oil prices just as the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers are set to extend supply cuts.
China’s crude imports could hit 8.8 million barrels per day (bpd) next year, while January shipments may hit a monthly record of 8.53 million bpd as independent refiners receive their import quota and buyers start to replenish stocks ahead of Chinese New Year in mid-February, said Seng Yick Tee, analyst at Beijing-based consultancy SIA Energy.
“An oil price at above $60/bbl is unlikely to dampen buyers’ enthusiasm as refiners can pass on the cost to end-users on the upward trend of crude prices,” Tee said.
Beijing is expected to bring forward the release of 2018 import quotas to December, allowing shipments to enter the country from January, refining and trade sources said. For 2017, the Ministry of Commerce issued quotas in January.
“Demand is accelerating because of more crude quotas coming in January,” a source with an independent refiner said.
The source said refineries are placing more orders for crude arriving in the second half of January on concerns that the quotas may not come in time.
Stronger than expected fuel demand and firm margins has lifted China’s refinery use rates and pushed crude oil inventories to their lowest in more than seven years as refiners drew down stocks.
China is likely to buy crude mainly from the Middle East and Russia, while some of its demand will be met from other regions, the sources said.
Spot premiums for Oman and Russian ESPO grades, two of the most popular among independent refiners, have hit multi-month highs for January loading.
As much as 800,000 bpd of U.S. crude is expected to arrive in Asia in December, said an analyst who tracks oil flows.
Royal Dutch Shell is sending 6 million barrels of North Sea crude to Shandong, where most of the country’s independent refiners are located, in December and January, trade flows data on Thomson Reuters Eikon showed.
Shell said it does not comment on commercial matters.