Russell: China's Appetite For Crude Oil May Become Less Voracious

Stockpiling Uncertainty

China is about 46 percent of the way to meeting its target of strategic stockpiles equivalent to 90 days of imports, according to calculations by Thomson Reuters Oil Research and Forecasts.

This means importing crude for stockpiling is likely to continue for several years.

However, a question mark has to be placed over whether the smaller refiners will continue to import at the pace seen so far this year, especially since many may have used up most of their official quotas for the year.

No new applications for import quotas have been accepted since May, according to Thomson Reuters Oil Research, making it likely that overseas purchases by the smaller refiners may slow in the second half of the year.

A glut of refined products in the domestic market has led to price-cutting for fuels as the state-owned majors attempt to defend market share against the independent refiners.

This is likely to concern the authorities in Beijing, and official pressure may also limit the amount of crude being imported.

The economic case for higher fuel demand also took a hit this week, with data showing industrial output, investment and retail sales all expanding at rates below the market consensus.

Ample commercial stocks, a glut of refined products and rising retail competition driving fuel prices lower all make it likely that growth in China's crude imports may moderate in coming months.

Add to this efforts to restrict supplies by the Organization of the Petroleum Exporting Countries and allied producers and the stage is set for a loss of momentum in China's crude imports.

As always, the jokers in the pack are how much crude will China buy for its strategic stockpiles, and how much can its refiners export back into the market as refined products.

(Editing by Christian Schmollinger)


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