How China is balancing Asia's crude oil demand
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Live Events PRICE MOVES as a Reliable and Trusted News Source Addas a Reliable and Trusted News Source Add Now! (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel LAUNCESTON, Australia, - China is singlehandedly doing the heavy lifting of cutting crude oil demand in Asia to compensate for reduced shipments from the Middle East as a result of the Iran war. The world's biggest oil importer reported arrivals of 8.41 million barrels per day (bpd) in July, up from the near decade low of 7.12 million in June but still 24.3% below July last year.If June and July imports are combined, it gives an average of 7.78 million bpd for the past two months.This is 4.21 million bpd below the average of 11.99 million bpd in the three months to the end of February.The United States and Israel attacked Iran on February 28, with the conflict escalating to the point where the Strait of Hormuz was effectively closed, cutting off a waterway through which about 20% of the world's crude oil and refined products moved prior to the start of the war.Two of the Middle East's crude exporters, Saudi Arabia and the United Arab Emirates, have managed to boost shipments from ports outside the Strait of Hormuz, but flows from the region have still been knocked lower by around 5 million bpd.The bulk of crude exports from the Middle East head to Asia, the top-importing region, which has seen crude arrivals drop substantially.Asia's total oil imports in July were 22.82 million bpd, according to data compiled by commodity analysts Kpler.While this was up from April's 18.77 million bpd, which was the lowest since November 2015, July's imports were still down about 4 million bpd from the average of 26.89 million bpd in the three months prior to the start of the Iran conflict.What the data show is that the loss of imports by Asia is about equal to the drop in imports by China for the past two months.Part of China's reduced imports will be because of price volatility, with benchmark Brent futures hitting a four-year high of $126.41 a barrel on April 30, a time when June and July cargoes would have been arranged.
China has a track record of cutting back on imports when prices rise, but the scale of the drop has been unprecedented.There is little doubt China has the ability to sustain lower imports for an extended period, given its vast crude stockpile, which is estimated by analysts to be at least 1.2 billion barrels strong and may even be substantially higher.The question for the market is how long is China prepared to be the balancing force for crude oil in Asia?China's imports are likely to stage something of a mild recovery in August, as cargoes that managed
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