China continues to bolster its crude oil stockpiles in July, despite a significant drop in imports. Refinery throughput in the country has been on the decline for four consecutive months, signaling weak demand in the world’s largest oil importer. The latest data indicates that approximately 280,000 barrels per day were added to China’s commercial or strategic inventories last month, a notable decrease from June’s figures. While the country’s crude oil imports hit a nearly two-year low in July, the trend of increasing stockpiles remains intact.
With limited transparency regarding the exact volumes within China’s stockpiles, estimates suggest a continuous buildup of reserves. Refinery processing rates notably dropped by 6.1% year-on-year in July, reaching the lowest level in terms of barrels per day since October 2022. Despite this softening trend, the surplus crude available to Chinese refiners stood at 800,000 barrels per day for the first seven months of the year.
The ongoing increase in stockpiles offers Chinese refineries the flexibility to reduce imports further if global oil prices surge due to geopolitical tensions, tightening supplies by the OPEC+ alliance, or an unexpected spike in demand elsewhere. The risks around escalating conflicts in key regions, including the Middle East and Eastern Europe, present real concerns that could impact oil prices.
Market observers are closely monitoring China’s demand growth projections for 2024. While OPEC remains optimistic about a substantial rise in Chinese oil consumption, recent data trends suggest a more subdued outlook. The International Energy Agency (IEA) projects a more moderate increase in China’s demand, indicating potential discrepancies in future oil consumption patterns.
In summary, China’s strategic stockpiling efforts in response to weakening refinery activities highlight a cautious approach towards potential market volatility. The delicate balance between supply, demand, and geopolitical factors underscores the intricate dynamics shaping the global oil landscape. As uncertainties persist, China’s evolving energy strategy will continue to influence broader market trends both regionally and internationally.
