China Has Played Key Role in Rebalancing Crude Market

China has played a key role in the rebalancing of the crude market in more ways than one, a Kayrros market note sent to Rigzone on Sunday stated.

“Not only has it emerged as the top outlet for Russian crude, but its own crude stocks have undergone large up and down swings since the onset of the invasion, much as they did in 2020-2021 during the first wave of the Covid-19 pandemic,” the Kayrros note said.

In the note, Kayrros outlined that Chinese crude inventories were “little changed” from pre-invasion levels, “up just ~20 million barrels, or 60,000 barrels per day”, but added that “this follows a roller-coaster that saw successive steep builds and draws in 2022 and early 2023”.

“China’s huge crude storage capacity allows it to play an outsize role in oil markets, absorbing vast amounts of excess crude supply or drawing down stocks when markets tighten,” the Kayrros note said.

“Chinese destocking helped global crude prices ease in 2H 2022 despite OPEC’s decision not to accommodate U.S. demands for more production,” the note added.

“China’s inventory swings of 2022 are reminiscent of the pattern of 2020-21, when its massive stock builds at the onset of the pandemic, combined with OPEC+ and U.S. production cuts, played … [a] key albeit somewhat under-appreciated role in rebalancing the ailing oil market,” the Kayrros note went on to state.

China Consumption

According to BP’s latest statistical review of world energy, China was the second biggest consumer of oil in 2021, behind the U.S. The country consumed 15.44 million barrels of oil per day in 2021, compared to 18.68 million barrels per day for the U.S., the review showed.

BP’s review, which included oil consumption data stretching back to 2011, outlined that China’s oil consumption has grown every year since then, when the demand figure was shown to stand at 9.6 million barrels per day. In 2012, this increased to 10.0 million barrels per day, in 2013 it was 10.5 million barrels per day, in 2014 it was 11.0 million barrels per day, in 2015 it was 11.8 million barrels per day, in 2016 it was 12.2 million barrels per day, in 2017 it was 13.0 million barrels per day, in 2018 it was 13.6 million barrels per day, in 2019 it was 14.3 million barrels per day, and in 2020 it was 14.4 million barrels per day, the review highlighted.

China’s oil production was 3.9 million barrels per day in 2021, according to the review, which revealed that the top oil producer that year was the U.S., with 16.5 million barrels per day, followed by Saudi Arabia, with 10.95 million barrels per day, and Russia, with 10.94 million barrels per day.

Pandemic, Invasion

As of February 28, 2023, 6.06pm CET, there have been 758.39 million confirmed cases of Covid-19, with 6.85 million deaths, according to the latest figures from the World Health Organization (WHO). A total of 13.22 billion vaccine doses have been administered, as of February 28, WHO data shows.

The weekly confirmed Covid case figure hit a new peak in the week commencing December 19, 2022, with 44.26 million cases, almost doubling the previous peak of 23.31 million cases, which was seen in the week commencing January 17, 2022, the latest WHO figures outlined.

Despite the new confirmed case peak, Covid deaths have remained well below the peak seen in the week commencing January 18, 2021, when deaths stood at 102,066, WHO data highlights.

Oil soared past $100 per barrel for the first time in years back in February 2022 as Russian forces escalated a conflict with Ukraine. Brent hit a 2022 peak close of $127.98 per barrel on March 8, 2022, before dropping to just over $76 per barrel in December 2022. As the conflict passed the one year milestone, Brent traded around the mid-$80 per barrel mark.

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