China’s crude oil imports last month rose by 8.81 percent month-on-month in June to average 10.54 million bpd, energy analytics provider OilX said in its latest monthly report, adding that the number was still lower than last year’s June average, by 2.45 million bpd.
What’s perhaps more interesting is that, according to the OilX report, China’s crude oil in storage has been on the decline. Since April, the report said, oil in storage, as calculated through satellite data readings, has fallen from 436 million barrels to 414 million barrels. The period coincided with the latest sustained rally in oil prices.
That Chinese oil imports were about to drop was clear a month ago. The country’s refiners ramped up their output a bit too fast as the economy began to recover after the pandemic hit and soon this ramp-up led to excess fuel supply and pushed their margins close to zero.
Beijing intervened, asking state-owned oil majors to stop trading their crude oil import quotas with private refiners. The government also reduced the second batch of crude oil import quotas for private refiners by as much as 35 percent last month, to a total of 35.24 million tons.
This would be enough to suggest with a high degree of certainty that oil imports may remain subdued for the net few months despite the drawdown in oil inventories. However, Beijing is also cracking down on private refiners and this, according to a recent Bloomberg report , could have wide-reaching implications for the local oil industry.
The crackdown began last month at a regional energy hub, with state investigators looking into allegations for tax law and environmental legislation violations. According to analysts, the crackdown could reduce independent refiners’ influence over the Chinese oil market and give more power in the hands of state-owned majors. This, in turn, could have long-term implications for Chinese oil imports.