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A red flag for oil? China's raw consumption is false



China introduced a new monthly import price for crude oil in April and continues to import growing volumes of crude oil this year and accounts for about $ 20,000. Two thirds of global demand growth in 2019. Yet another rough estimate of actual Chinese oil consumption patterns recently suggests that the US and China trade war has hit China's industries, and nearly half of the increase in crude imports has been stored so far This year, according to Reuters columnist Clyde Russell, who offers an interesting perspective on whether China's heavy crude oil imports reflects what happens to the Chinese economy.

Signs point to a slowdown in China's economic growth, while storage ̵

1; at high levels so far this year – could fall later in 2019, if oil prices rise to a level that Beijing considers too high to build inventory at the current pace .

China hit a new monthly record of 10.64 million bpd in crude oil imports in April this year, when refineries rushed to fill up with Iranian oil before the US removed the sanctions. Subsequently, China's crude oil imports fell in May from the monthly record in April, when Chinese refineries drastically reduced Iranian oil imports after the end of US exceptions, and as some state refiners were offline for scheduled maintenance.

The headline number for China's crude oil imports suggests that imports from the first half increased by 8.8 percent from the same period last year or about 800,000 bpd, according to estimates from Reuters Russell.

This growth accounts for the majority of the world's expected growth in oil demand this year, currently fixed at 1.1 million bpd-1.2 million bpd by OPEC, EIA and the International Energy Agency (IEA) . Related: OPEC: Oil and gas are part of the solution to climate change

But China is believed to have accelerated putting commodity into commercial or strategic storage, while also increasing refined oil product exports this year, which means that it may have seen much less growth in actual domestic demand for oil.

The crude oil supply in China – including imports and domestic production – minus refineries, suggests that in the period January to May, China put 1.21 bpd in either commercial or strategic storage compared to 850,000 bpd stored in the same period last years, according to Russell's calculations.

China does not talk about storage, so this is only an estimate, but this estimate suggests China accelerated storage this year with 45 percent of the raw import growth in stock.

Add to this increased export of fuels, and China's actual crude consumption growth may have at N only 340,000 bpd in H1 2019, Russell argues.

Earlier this year, data from Wells Fargo Securities showed that China's diesel consumption fell by 14 percent in March and 19 percent in April to the lowest levels in a decade. 19659002] "We believe that the accelerating decline is likely tied to economic factors and the effects of the" war "tariff with the United States," CNBC quoted Wells Fargo energy consumer Roger Read as said in a note at the end of May. [19659002] Recently, BlackRock, the world's largest asset management company, said that the Chinese economy is set to "lull" because of the commercial war, which has become the main driver of the world economy and markets. According to BlackRock, investors are "too optimistic" that China's stimulus measures could boost economic growth, says South China Morning Post, the asset manager.

"We believe that China's GDP should be able to avoid falling below 6% targets, but some industries, especially export-related, will be hurt, and jobs and wages should not remain so stable, even though GDP does," says Iris Pang. ING Economist, Greater China, last week Related: Major Blackout threatens Venezuelan oil production

Apart from the wobbling economy, China's crude oil demand and possibly imports may be cut short term by refineries Restricting the refinery in the third quarter as massive refineries started and lower domestic fuel demand has created a fuel glut in the country making crude refining margins.

According to JLC International, Sinopec ZRC will reduce daily crude consumption by 2.17 percent while Tianjin Petrochemical is down. set to reduce its daily cruises by 5.12 percent in July

So far, China has shown a robust oil import growth, but the actual Industrial and industrial consumption may have been much lower than the surplus number suggests. If China reduces the amount of raw material if oil prices rise, crude oil imports may flash a warning sign in the oil market, the world's leading oil importer sees a marked slowdown in rising demand growth.

By Tsvetana Paraskova for Oilprice.com

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