Rather than cutting back on imports, China pushed crude oil into storage tanks at almost double the rate in the first quarter of this year than it did in the same period in 2019 as the new coronavirus hit domestic consumption.
China doesn’t release official data on flows into strategic and commercial stockpiles, but an estimate can be made by subtracting the amount of crude processed by refineries from the total volume of oil available from both imports and domestic output.
China’s crude oil imports were 10.2 million barrels per day (bpd) in the first three months of the year, according to customs data.
Domestic output was 3.74 million bpd, giving a total of available crude for the quarter of 13.94 million bpd.
Refinery throughput for the first quarter was the equivalent of 11.96 million bpd, meaning of the total available crude 1.98 million bpd wasn’t processed by refineries.
Doing the same calculations for the first quarter of last year shows imports of 9.83 million bpd, domestic production of 3.84 million bpd, and refinery processing of 12.6 million bpd, leaving a gap of 1.07 million bpd.
The numbers suggest that China almost doubled the rate at which it put oil into storage in the first quarter of 2020, in order to deal with the loss of consumption as the coronavirus caused much of the country to be placed in some form of lockdown.
It’s also worth noting that China’s exports of refined fuels also rose in the first quarter of this year, reaching 18.02 million tonnes, up 9.7% from the same period last year.
A breakdown by type of refined product isn’t yet available, but it’s likely the bulk of the increase was in gasoline and in middle distillates such as jet kerosene and diesel.
Overall, the picture that emerges from the first quarter is that China decided to increase crude storage flows rather than cut back on imports.
The other factor in dealing with the loss of demand from the coronavirus was that refinery throughput did drop and exports of refined fuels increased, but not by huge margins.
CHINA’S UNIQUE CIRCUMSTANCES
However, rather than being a template for the rest of the world as it battles to contain the coronavirus, China is likely to be something of an outlier.
Other major crude importing countries lack the ability to simply divert oil into storage on the scale that China can, meaning they will have to lower the amount of crude being imported.
Even countries with large commercial and strategic storages, such as the United States, will find that the volume of crude available is so much that it will overwhelm available tank space within weeks, rather that months.
China’s ability to double storage flows to almost 2 million bpd over an entire quarter makes it unique, not a model.
To put China’s storage flows in perspective, at about 2 million bpd they are 25% higher than the total crude consumption of the United Kingdom, the world’s sixth-largest economy.
It’s also likely that China will continue to suck up crude oil for its stockpiles, especially given the collapse in prices since the coronavirus caused much of the developed world to put their economies into some form of lockdown.
China is on track to import at least 9.35 million bpd of seaborne crude in April, up from 8.8 million bpd in March, according to Refinitiv vessel-tracking data, filtered to show only cargoes already discharged, awaiting discharge or underway and due to offload prior to the end of the month.
Seaborne imports exclude pipeline volumes from Russia and central Asia, which were around 843,000 bpd in March.
China’s appetite for imported crude for storage is probably one of the few bright spots for the embattled oil industry currently, although by itself it’s nowhere near enough to compensate for the loss of an estimated 30 million bpd of global consumption.
