Will Asia Sustain the August Rebound in Crude Oil Imports?

Crude oil arrivals in the world’s biggest importing region, Asia, appeared to have rebounded in August from a two-year low in July.

China, the world’s biggest crude importer, is estimated to have increased August imports by more than 1 million barrels per day (bpd) from July, while the other big Asian importers – India, South Korea and Japan – also saw imports rise from low levels in July, according to data from LSEG Oil Research cited by Reuters columnist Clyde Russell.

The rebound in Asian imports could be attributed in part to seasonal demand patterns, as importers tend to increase purchases during the third quarter to stockpile fuel for peak winter demand.

But some of the recovery in imports could be attributed to lower oil prices, with August cargoes likely to have contracted in early June as Brent crude prices fell to $76-77 a barrel.

With China’s apparent oil demand weaker than expected, lower international prices may have played a bigger role in Chinese purchases for August.

Going forward, the key question for imports from Asia and China is whether the rise in oil prices in early July, when Brent topped $85 a barrel, delayed refiners from boosting purchases for September. That remains to be seen in the next month or two. If China and the rest of the major Asian importers sustain the expected rebound in imports in August, it will be one of the main drivers of oil prices for the rest of the year.

Related: Oil prices fall as OPEC+ considers output hike in October

In August, Asia is estimated to have imported 26.74 million barrels per day (bpd) of crude oil, up 2.18 million bpd from July’s two-year low, data from LSEG Oil Research showed.

In July, Asian crude oil imports fell to their lowest daily level since July 2022. While slower imports from India, the world’s third-largest crude importer, were attributed to seasonality and lower demand in the season monsoon, Chinese consumption disappointed. oil bulls so far this year and has the market concerned about demand in the second half amid a weaker economy, the ongoing housing crisis and tepid demand for fuel.

This week, Asia’s biggest refiner China Petroleum and Chemical Corporation’s first-half earnings report confirmed market concerns about weak fuel demand in China.

Sinopec, or China Petroleum and Chemical Corporation, as it is officially known, reported a first-half net profit that rose 1.7 percent year-on-year, thanks to higher domestic crude oil and natural gas production and higher international prices of oil.

But refining figures from Asia’s biggest refiner by capacity deteriorated compared with the first half of last year, reflecting weak demand from China, particularly for diesel, which has spooked markets this year.

Sinopec flagged “severe challenges from weak market demand and margin squeeze in certain products” in the first half of the year.

For August, LSEG Oil Research estimates Chinese crude imports at 11.02 million bpd, up from 9.97 million bpd in July, according to official Chinese customs figures.

Higher imports in August may have been influenced more by low oil prices in early June than by a change in oil demand from China.

So far this year, China’s commodity imports have been heavily dependent on prevailing international energy commodity prices.

Chinese purchases of LNG, coal, copper and iron ore rose in the first half of the year compared with year-ago levels, despite an ongoing housing crisis and a sluggish economy. In the first half of 2024, China’s imports of crude oil, natural gas including LNG, coal, iron ore and copper appear to be inversely correlated with price trends of these commodities in international markets.

It’s no secret that China prefers to buy its crude as cheaply as possible – one of the reasons why it is now a key customer of Russian crude, which is embargoed in the West.

By Tsvetana Paraskova for Oilprice.com

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