China's crude oil imports remained weak, as expected, in July, edging up a mere 0.9% to 8.83 million b/d from the 47-month low in June amid destocking activity and slow domestic demand recovery, data from the General Administration of Customs showed Aug. 7.
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The increase in inflows in July was contributed by independent refineries which lifted their crude imports by 25.4% to 3.16 million b/d, from 2.52 million b/d in June, according to S&P Global Commodity Insights data.
Meanwhile, their state-owned peers are more likely to continue reducing spot purchases to consume their stocks.
According to Kpler shipping data, China's crude stocks stood at an 11-month high of 945 million barrels in May, accounting for 63% of the country's crude storage capacity that Kpler monitors.
With the slump in crude imports, stocks fell further to 913 million mt in July from 940 million barrels in June, the Kpler data showed.
"The destocking activity will last until September, when peak oil demand season finally starts," a London-based analyst said. "So, we expect China's crude imports are unlikely to see a notable rebound until then."
Typically, China's peak oil products consumption occurs over September and October during the Mid Autumn Festival and the week-long National Day holidays, boosting gasoline and jet fuel demand for travel purposes. Autumn is also the season for harvesting, fishing and construction activities that drive gasoil demand.
But in August, as more and more infections were found in tourist destinations, including Xinjiang and Hainan, movement controls had hurt gasoline and jet fuel demand recovery during the summer holiday.
The GAC releases data in metric tons, which S&P Global converts to barrels using a 7.33 conversion factor. On a metric ton basis, the 37.33 million mt in July rose 4.2% from June but fell 9.5% year on year.
In the first seven months of the year, China's crude imports slipped 4% year on year to 289.84 million mt, or 10.02 million b/d, the data showed.
China's crude oil imports in H2 will feel the pressure of bulging domestic inventories, an uncertain demand recovery and oil product exports restrictions -- factors that could dim chances of any robust growth in feedstock inflows.
Market analysts have penciled a flat or even a decline in China's crude imports for 2022. The country imported 10.30 million b/d of crude in 2021, down 5.1% from 2020, the GAC data showed.
Exports up 6% from 5-year low
Oil products exports in July recovered 6.4% to 3.41 million mt from the five-year low of 3.21 million mt in June, the GAC data showed.
The volume remained low, dropping 26.5% year on year despite the government having issued 5 million mt of export quotas in early July for gasoline, gasoil and jet fuel; leaving 10.6 million mt of quotas for the second half of 2022.
This resulted in China's oil product exports dropping 39% year on year to 25.04 million mt in January-July.
China's oil product exports are expected to increase in August, as strong export margins are likely to raise its gasoil outflows to hit 1 million mt, a one-year high, according to industry analysts and refinery sources with knowledge of the matter.
"[It will be] Wise to use limited quotas to increase gasoil exports as its margin is stronger than others," a Beijing-based analyst said. "And better to export now rather than later because product cracks are narrowing recently." He added that Chinese firms' export margin for gasoil is likely at $25-$30/b, wider than gasoline which stood at more than $10/b.
But overall oil products exports will be capped in August as limited available quotas are likely to reduce gasoline outflows.
The GAC's oil product import and export data are believed to include a basket of oil products, with gasoline, gasoil, jet fuel and fuel oil as key products. The breakdown by products will be released on Aug. 20.
China has also cut its oil products imports in the first seven months of the year to 13.21 million mt, down 12.1% year on year. As a result, net exports dropped 54.6% during the period.
CHINA'S PRELIMINARY OIL TRADE DATA (million mt):
Source: General Administration of Customs