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China's end-July implied crude stocks rise 33 mil barrels on month

Highlights

Overall crude supply up 10.4% year on year

Stocks expected to build at slower pace in August

Singapore — China's implied crude oil stocks at the end of July were 33.29 million barrels higher compared with the end of June, according to S&P Global Platts calculations based on official data.

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In contrast, the country's implied crude oil stocks' increment in July 2018 was 8.68 million barrels.

The July implied stock build was higher than the previous expectation, as reported throughput in July retreated month on month despite less refinery outage and improving refining margin activities.

Satellite data from Ursa, which can observe changes in surface-based storage facilities, showed that China's crude stocks stood at 669.6 million barrels at end of July. This was 2.18 million barrels lower than that in end-June, but 34.78 million barrels higher than the level a year ago.

China does not release official stocks data. Platts calculates the country's net build or draw in implied crude stocks by subtracting official refinery throughput data from the country's crude supply data. The latter takes into account net crude imports and domestic production.

The implied crude stocks that Platts calculates do not take into account China's crude oil consumption for any usage other than refining, due to a lack of official data.

China's implied crude stocks growth through July

China's overall crude supply in July gained 10.4% year on year to 405.34 million barrels, or 13.51 million b/d. But the volume edged down 0.4% from June, led by a 2.1% decline in domestic crude output.

Meanwhile, crude throughput declined by 2% month on month despite rising 4% from a year ago, data from the National Bureau of Statistics showed.

SLOWER PACE IN AUG

Looking ahead, it is likely that stocks will build at a slower pace, or even decline in August, analysts said.

"In August, China's crude oil throughput in August was likely to go up from July amid less outage and improving refining margin to prepare for the peak season in September and October, while crude oil imports will be almost flat to last month," a Beijing-based analyst said.

S&P Global Platts Analytics forecast the country's throughput during this month to reach about 12.73 million b/d, up 2.3% from July, despite a few independent refineries in Shandong getting hit by typhoon Lekima over the last weekend, while a few of them in Zibo region remained impacted by flood.

"Throughput at several independent refineries in Shandong were impacted by flooding though we expect other players to provide offset quickly," Platts Analytics said in an August 13 report.

"The small-scale independent refiners suffered from negative margins in June which prevented them from...buying for August delivery," a crude oil trader said.

China's crude oil imports increase (million barrels)

-- Oceana Zhou, oceana.zhou@spglobal.com

-- Edited by Manish Parashar, manishparashar@spglobal.com