China's Fuel Export Surge Eases Inventory

With international oil prices hovering at low levels, calls for ¡°buying crude oil at low prices¡± are growing louder in China, and China¡¯s biggest crude oil depot began to import oil at the end of last year. But according to figures from China Customs, crude oil imports in December totaled 14.37 million tons (about 3.5 million barrels per day), only 7.6% over November¡¯s number, the lowest in 2008, and 17% lower than in March, with the year¡¯s highest monthly import. 

In clear contrast, December¡¯s China¡¯s oil product exports reached 2.01 million tons, an increase of 58.3% over the previous month and 66.1% year on year.

According to Wang Zhen, an expert at the China University of Petroleum, the slowdown in crude oil import is due mainly to weak domestic demand. With production declining from China¡¯s pillar industries, such as power, steel, non-ferrous metals, and automobiles, energy demand is decreasing accordingly.

Tong Lixia, a researcher at the Chinese Academy of International Trade and Economic Cooperation of the Ministry of Commerce, says that China¡¯s strategic oil depots had all stored oil to capacity and there was no room now for more oil inventory even if China wanted to buy at today¡¯s low price.

Another factor affecting China Customs¡¯ figures may be the time difference between order placement and spot buying.

For Wang Zhen, three factors have led to the large increase in oil product export. First, news about China¡¯s oil product prices was released in December. Due to price cut expectations, many commercial oil depots cleared their inventory so they could fill up after the price cut, and oil inventory gathered in the depots of Sinopec and PetroChina. Exporting became the best way to reduce inventory.

Second, China mostly suspended oil product exports in the middle of 2008 due to the oil crunch and to guarantee supplies during the Beijing Olympic Games. The current increase in oil product export is a normal rebound.

Last, China¡¯s two petroleum giants are more than willing to export oil products to neighboring countries and regions where prices are higher.

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