LAUNCESTON: Asia’s imports of crude oil slipped slightly in April from March, as increased arrivals in China failed to offset lower purchases elsewhere in the world’s top-importing region.
April imports were 26.89 million barrels per day (bpd), down from 27.33 million bpd in march and roughly in line with February’s 26.68 million bpd, according to data compiled by LSEG Oil Research.
For the first four months of the year Asia’s crude imports were about 27.03 million bpd, only 300,000 bpd higher than for the same period in 2023, the LSEG data showed.
This means that crude oil arrivals in Asia are growing at a pace that is so far well short of the forecast by groups such as the Organization of the Petroleum Exporting Countries (OPEC).
OPEC’s April oil market outlook forecast that global oil demand will rise by 2.25 million bpd in 2024 from the previous year, with 1.24 million bpd of that coming from non-OECD countries in Asia.
China, the world’s largest crude importer, is expected by OPEC to see demand increase by 680,000 bpd in 2024.
However, using official customs data for the first quarter and LSEG’s estimate for April imports, China’s crude arrivals for the January-April period were about 27.03 million bpd, which is 290,000 bpd higher than the customs data for the same period last year.
It should be noted that there is a difference between crude oil imports and demand growth, as the total demand figure can be met from more than just imports such as domestic production and changes in inventories.
Nonetheless, the slower pace of imports in China and the rest of Asia suggest that demand growth is so far nowhere near as strong as the OPEC forecast indicates.
Saudi Arabia may raise prices for most oil grades to Asia for June
It should also be noted that OPEC, and other analysts, expect demand growth to accelerate over the northern summer months and extend into the second half of 2024, largely on the view that China’s economy is recovering growth momentum and the rest of the world is emerging from its inflation-linked slowdown.
The International Energy Agency (IEA) has a more modest target for global oil demand growth, with its April report estimating 1.2 million bpd for 2024.
The IEA’s forecast for China’s oil demand growth is 500,000 bpd for 2024, meaning it is also significantly above the current growth rate in China’s imports.
Price impact
The question then becomes are China’s crude imports likely to increase in coming months, and the answer likely depends on movements in crude prices as much as it may on China’s improving economy.
China’s recent pattern of crude imports has been that they increase when oil prices soften and ease back when they increase, allowing for a lag of around two months to account for when cargoes are arranged and physically delivered.
This means that much of the oil that was offloaded in the first four months of the year was bought when crude prices were still soft.
Global benchmark Brent futures hit a six-month low of $72.29 on Dec. 13, and then recovered to trade in a range around $80 for much of the first quarter.
Rising geopolitical tensions and extended output cuts by the OPEC+ group, which includes OPEC and allies such as Russia, led Brent higher from mid-March onwards, with the contract peaking at $92.18 on April 12.
This means the impact of the price spike from mid-March onwards has yet to show up in China’s import figures, and it will likely only be a factor from May onwards.
Saudi Arabia may raise prices for most oil grades to Asia for June
What happens to China’s imports in May, June and July will go some way towards answering the question as to whether China’s economic recovery is strong enough to ameliorate the impact of higher oil prices.
The opinions expressed here are those of the author, a columnist for Reuters.