REUTERS

China crude imports to pick up as storage, buyers emerge

Business | Mon May 11, 2015 1:48pm EDT

SINGAPORE | By Jacob Gronholt-Pedersen

 

China's appetite for crude oil is expected to pick up later this year as storage comes online and
new buyers emerge, even after its inbound shipments surpassed United States imports last month
for the first time, analysts and traders say.


China's crude oil imports hit a record 7.37 million barrels per day (bpd) in April, making it the
world's biggest importer for the commodity last month.


And despite slowing economic growth, China's crude purchases are expected to keep climbing in
second-half 2015, supporting oil prices that have rebounded about 40 percent since touching sixyear
lows earlier this year due to a supply glut.


China is building vast new oil storage caverns to house an expanded strategic petroleum reserve
(SPR), keeping imports high despite slower domestic demand.


Consultancy Energy Aspects says Chinese SPR caverns with a capacity of 132 million barrels
could contain up to 100 million barrels in the second half of this year.


SIA Energy expects two new strategic storage facilities - in Jinzhou and Tianjin - with total
capacity of about 50 million barrels to be completed in the fourth quarter.


Chinese refiners are expected to rebuild crude stocks pulled down by months of high refining
rates, and will begin to fill new commercial storage tanks with a total capacity of nearly 40
million barrels that will come online this year.


"Even though China's GDP growth is stalling, its crude appetite may swing upwards in H2 15,"
said Amrita Sen, Chief Oil Analyst at Energy Aspects.


An oil trader with a Chinese state company agreed:
"I expect to see higher commercial inventory levels," the trader said on condition of anonymity.


"Everybody is expecting higher oil prices toward the end of the year, so naturally there will be
inventory (build)," he said, as refiners buy crude before it gets more expensive.


Fresh demand from independent "teapot" refiners, which account for a fifth of China's refining
capacity, could also add to imports.


The country's biggest private refiner, Shandong Dongming Petrochemical Group, expects to get
approval in the third quarter to start importing about 100,000 barrels per day.


Adding to China's import needs is a potential dip in domestic output this year of about 120,000
bpd, forecast by researchers at Wood Mackenzie as companies cut capital spending.


The outlook for crude imports contrasts with slowing economic growth in China, where oil
demand is forecast by the International Energy Agency to grow 2.7 percent in 2015, down from
double digit growth at the beginning of the decade.


Last year, China's crude imports grew 9.5 percent over 2013, boosted by a late-year surge as it
bought cheap oil for strategic storage.


(Editing by Tom Hogue and Christopher Johnson)


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