In an unusual turn of events, China’s crude oil reserves experienced a decline in July, marking a departure from the norm of consistent accumulation over the past 33 months. This phenomenon was propelled by a combination of factors including reduced imports and an uptick in domestic demand, compelling refineries to ramp up their production to meet both national and international needs.
The pronounced slowdown in crude oil imports had a direct impact on the Chinese market, leading to an interesting shift in inventory dynamics. Refineries, in an effort to bridge the gap between supply and demand, stepped up their output to an average of 510,000 barrels per day, tapping into the stored reserves. This move marked the first instance of a decline in crude oil inventories in more than two and a half years.
While precise figures detailing the inflow and outflow of crude oil through China’s strategic and commercial terminals remain undisclosed, analysts have managed to estimate the available oil volume through deduction. By subtracting the quantity of refined crude oil from the total amount of crude oil imported and domestically produced, an approximation of the available stock can be derived.
China’s National Bureau of Statistics (NBS) recently revealed that in July, the country’s refineries collectively generated an impressive 63.13 million tonnes of oil, which translates to around 14.87 million barrels per day. This noteworthy figure marked a substantial 17.4% increase compared to the previous year’s statistics. Amongst these figures, June stood as the highest month for crude oil refining, boasting a daily output of 14.9 million barrels, and a comparable level of 14.87 million barrels per day was sustained in April.
Breaking down the sources of crude oil, it’s evident that refineries relied on a combination of imports and domestic production. Import figures stood at 10.29 million barrels per day, with domestic production contributing 4.07 million barrels per day. Calculating the net balance by subtracting the refinery’s output from the combined crude oil inputs reveals a shortfall of 510,000 barrels per day.
This rare occurrence signifies the first time since November 2021 that refinery production has outstripped the volume of available crude oil. In a notable shift, the gap between oil supply and demand for the month reached 375,000 barrels per day, shedding light on the intricate balance that underpins China’s intricate crude oil landscape.
As China navigates these unique circumstances, experts will be closely watching the interplay of global oil dynamics, import trends, and domestic demand to ascertain the trajectory of its crude oil inventories in the coming months. The intricate relationship between these factors will undoubtedly continue to shape the nation’s energy landscape and impact international markets.