CHINA DATA: May crude imports drop to five-month low at 9.69 mil b/d

China's crude imports slumped 14.6% on the year to a five-month low of 9.69 million b/d in May amid destocking activities, showed preliminary data released June 7 by the General Administration of Customs, or GAC.

The inflow was 1.8% lower than 9.86 million b/d imported in April.

GAC releases data in metric tons, which S&P Global Platts converts to barrels using a 7.33 conversion factor. On a metric ton basis, the May imports rose 1.5% on the month at 40.97 million mt.

The May imports were within market expectations amid destocking activities, as the country's state-owned refineries' throughput registered a month-on-month increase.

"With higher crude price, it is a good time to destock to lift margins instead of keep purchasing heavily," a Hong Kong-based analyst said.

ICE Brent crude has been hovering over $70/b so far in June, contrasted to around $40/b a year ago.

China's crude inventory declined to 917.44 million mt in May from 929.23 million mt in April, according to commodity market data provider Kpler.

Destocking

The destocking activity in May was more likely from the state-owned sector, where the average utilization rate rose to 80% from 76% in April.

The small-scale independent refineries, on the contrary, cut their runs to 67% in May from the average 71% in April while increasing their crude imports by 432,000 mt on the month, according to S&P Global Platts.

The independent refineries though have slowed down their crude buying for delivery in the coming months due to limited crude import quotas for the rest of the year, market sources said.

"They [the independent refineries] built their crude stock to sustain operation when crude price is high and quota is tight. So that their appetite is also weakening," a Singapore-based trader said.

The independent refineries imported 8.86 million mt of bitumen blend in January-May on top of 71.81 million mt of crude in the same period, according to Platts data. In contrast, 102.68 million mt of crude import quotas were allocated to the refineries for 2021, and about 48 million mt quotas were expected to be issued in the second batch of quota allocations for this year. This suggests around 80 million mt of quota available for the rest of the year when access to bitumen blend imports is effectively blocked due to China's consumption tax.

Thanks to heavy inflows in the first quarter of the year, China's crude imports reached 220.54 million mt, or 10.71 million b/d, in January-May, up 2.3% year on year, GAC data showed.

Oil products exports

Oil products exports dropped 20.7% month on month at 5.41 million mt due to improved domestic demand, despite a 38.9% year-on-year jump due to a low basis in the same month of 2020. China slashed oil products exports in 2020 as COVID-19 capped international demand.

In May, domestic demand for oil products recovered to prepandemic levels, with slightly higher number of people on the road or taking flights during the five-day Labor Day holidays from the same period in 2019, according to the Ministry of Transport.

In the first five months, the country's oil products exports edged up 0.5% at 30.02 million mt, according to GAC data.

Looking forward, China's oil products exports are set to fall as refineries have to keep more barrels at home to compensate a reduction in blending material imports while the government plans to slash oil products export quotas, Platts reported earlier.

China is set to levy a consumption tax on light cycle oil and mixed aromatics imports from June 12 -- blending materials to produce gasoil and gasoline, respectively. This would reduce domestic supplies for the two key oil products.

Meanwhile, Beijing was said to only issue a few million mt of oil products export quotas for the rest of the year on top of its 29.5 million mt quota allocated in the first batch.

This would lead to a drop in oil products exports from the actual volume of 45.74 million mt in 2020.

China's preliminary trade data:

(million mt)

Source: General Administration of Customs