China oil Aug10.pngThe Petromatrix report is currently a must-read for anyone seeking to understand what is really happening in crude oil markets.
Its latest issue analyses China’s demand. It suggests this is not as strong as the bullish investment banks on Wall Street might wish.
China’s refinery runs are certainly rising, as its new major capacity comes online. And its own oil production in July was up 250kpd versus 2009. But its oil imports appear to have peaked, with July’s 1mbd lower than in June, and slightly below 2009 levels. In addition, oil product imports are now falling, as domestic production increases.
Thus, as the chart shows, China’s total imports of crude oil and products were actually 441kpd less in July (blue line) than in July 2009 (red). They were only 640kpd higher than in July 2008 (yellow) and just 478kpd above July 2007 (green). Pretty clearly, this slow growth in total domestic demand does not justify today’s very high crude oil prices.
The figures also suggest that China is keeping its own refinery operating rates at a high level by replacing imports with domestic production. As such, it poses a real threat to other integrated refiners/petchem producers across Asia. If they have to cut refinery runs to compensate for China’s higher production, then petchem feedstock supply will suffer.