Instead of cutting back on imports, China has begun the unusual step of pushing crude oil into storage tanks at almost double the rate in the first quarter of this year than it did in the same period in 2019 as COVID-19 has hit domestic consumption.
China isn’t usually known for releasing official data on the flows into strategic and commercial stockpiles, but estimates can be made by deducting the amount of crude processed by refineries from the total volume of oil available from both imports and domestic output.
China’s crude oil imports were at 10.2 million barrels per day (bpd) in the first three months of the year, according to customs data.
While domestic output was at 3.74 million bpd, giving a total of available crude for the quarter of 13.94 million bpd.
Refinery throughput for the first quarter was the equivalent of 11.96 million bpd, meaning of the total available crude 1.98 million bpd wasn’t processed by refineries.
Doing the same calculations for the first quarter of last year shows imports of 9.83 million bpd, domestic production of 3.84 million bpd, and refinery processing of 12.6 million bpd, leaving a gap of 1.07 million bpd.
These numbers suggest that China has almost doubled the rate at which it has put oil into storage in the first quarter of 2020, in order to deal with the loss of consumption as the coronavirus caused much of the country to be placed in some form of lockdown.
It might be also worth noting that China’s exports of refined fuels also rose in the first quarter of this year, reaching 18.02 million tonnes, up 9.7% from the same period last year.
Overall, the picture that emerges from the first quarter is that China decided to increase crude storage flows rather than cut back on imports.
Rather than being a template for the rest of the world as it battles to contain the coronavirus, China is likely to be something of an exception. Some of the other major crude importing countries lack the power to simply divert oil into storage on the same scale that China can, meaning they will have to lower the amount of crude being imported.
Even countries with large commercial and strategic storages, such as the United States, will find that the amount of crude oil available is so much that it will overwhelm available tank space within weeks, rather than months.
And that makes China’s ability to double storage flows to almost 2 million bpd over an entire quarter makes it somewhat quite unique.
To put China’s storage flows in perspective, at about 2 million bpd they are 25% higher than the total crude consumption of the United Kingdom, the world’s sixth-largest economy.
It’s also likely that China will continue to suck up crude oil for its stockpiles, especially given the collapse in prices since the coronavirus caused much of the developed world to put their economies into some form of lockdown.
China’s thirst for imported crude for storage is probably one of the few bright spots for the embattled oil industry currently, although by itself it’s nowhere near enough to compensate for the loss of an estimated 30 million bpd of global consumption.
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