China’s crude oil imports rebounded in November, however so did storage flows: Russell

(Repeats column printed earlier. No change to textual content.)

LAUNCESTON, Australia, Dec 16 (Reuters) – China’s crude oil imports in November hit a 14-month excessive, however a lot of the extra quantity is prone to have ended up in storage as refinery processing remained subdued.

China, the world’s greatest crude importer, had a surplus of about 1.77 million barrels per day (bpd) in November, based on calculations based mostly on official information.

That is the second-biggest month-to-month surplus this 12 months and behind solely the 1.85 million bpd in August.

The size of the surplus crude erodes any bullish interpretation of the rebound in November’s oil imports.

China does not disclose the volumes of crude flowing into or out of strategic and industrial stockpiles, however an estimate will be made by deducting the quantity of crude processed from the entire of crude obtainable from imports and home output.

China’s refineries processed 58.51 million metric tons of crude in November, equal to about 14.24 million bpd, based on information launched on Monday by the Nationwide Bureau of Statistics.

This was up a tiny 0.2% from November final 12 months, marking the primary month in seven that refinery throughput has risen from the identical month in 2023.

China imported 11.81 million bpd in November, the strongest month since August final 12 months and up 14.3% from November 2023.

Home output rose 0.2% in November from the year-earlier month to 4.20 million bpd.

Combining imports and home manufacturing offers a complete of 16.01 million bpd of crude obtainable to refineries.

Subtracting the amount processed of 14.21 million bpd leaves a surplus of 1.77 million bpd.

For the primary 11 months of the 12 months, China’s surplus crude was about 1.12 million bpd, about 360,000 bpd greater than what was saved over 2023 as an entire.

It is price noting that not all of this surplus crude is prone to have been added to storage, with some being processed in vegetation not captured by the official information.

However even permitting for gaps within the official information, it is probably that China has been importing crude at a far larger charge than it wants to fulfill its home gasoline necessities.

The query is why are China’s refiners shopping for vastly extra crude than they’re processing?

It is fairly clear that home gasoline demand shouldn’t be strengthening, and should have already peaked relating to gasoline given the surge in gross sales of electrical autos.

Diesel demand can be weaker, having been hit by the swap to vehicles powered by liquefied pure gasoline.

It is extra probably that China’s refiners are stocking up on crude as a result of they deem present costs to be affordable and they’re hedging in opposition to any rally subsequent 12 months.

International benchmark Brent crude futures have been in a downtrend on the time when November-arriving cargoes would have been organized.

Brent went from a excessive of $87.95 a barrel on July 5 to a low of $69.00 on Sept. 11, simply across the time that a lot of November’s cargoes would have been organized.

Because the September low Brent climbed to a peak of $81.16 a barrel on Oct. 7, but when this rally did trigger China’s refiners to ease again on purchases, this can solely present up in cargoes arriving in January.

Nevertheless, because the October excessive, Brent has eased again to commerce in a reasonably slim vary anchored round $73 a barrel, which is a degree prone to be low sufficient to encourage ongoing shopping for curiosity by China’s refiners.

The trick for the oil market is to not confuse larger imports by China with a restoration in precise consumption of fuels.

Whereas stronger imports will act to assist crude costs, it should take a sustained restoration in refinery processing to persuade the market that China is as soon as once more exhibiting strong oil demand development.

The views expressed listed below are these of the writer, a columnist for Reuters.

(Enhancing by Stephen Coates)