(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia, Feb 2 (Reuters) - Asia's imports
of crude oil reached a record high in January, but the strength
wasn't driven by China, with the world's biggest buyer actually
recording a decline.
Asia's total imports were 29.13 million barrels per day
(bpd), up 11.1% from December's 26.22 million bpd and eclipsing
the previous all-time high of 29.10 million bpd from November,
according to data compiled by Refinitiv Oil Research.
Much of the recent market narrative has been how China's
re-opening from COVID-19 lockdowns will drive up crude oil
demand, but the data shows this story has yet to play out in
reality.
China's imports were assessed at 10.98 million bpd in
January, down from December's 11.37 million bpd and November's
11.42 million bpd.
The relatively small decline may be related to the early
Lunar New Year holidays, which fell entirely in January this
year.
This may have led to some pulling forward of cargoes into
December and some pushing back into February.
However, the overall message from China's crude oil imports
is that while they are solid, they have yet to accelerate as
expected by the bullish China economic narrative.
This isn't too surprising as physical demand tends to lag
market sentiment, given that cargoes are arranged several months
in advance.
This means that any acceleration in China's crude imports is
likely only from March onwards, and even then there are several
other factors to consider.
The first is whether the boost to travel, and thus fuel
demand, seen over the Lunar New Year is maintained, or whether
large parts of China's population continue to hunker down at
home now that the holidays have passed.
It's likely that COVID-19 will largely fade as a factor in
China, just as it has in other countries that have fully
re-opened, but how quickly fuel demand recovers and exceeds
pre-pandemic levels is still uncertain.
FUEL EXPORTS
Another factor is the price of crude oil and the interplay
between China's inventories and its exports of refined products.
China has ramped up exports of fuels such as diesel and
gasoline as Beijing granted export quotas to refiners, a move
that boosts economic activity and the refiners' profitability as
they can grab a share of the strong margins for fuel currently
available in Asia.
As long as China can secure crude at a price low enough to
make fuel exports compelling, it's likely that refiners will
continue to seek to maximise shipments of products.
China has increasingly turned to Russian crude, which is
being sold at steep discounts as Moscow seeks to find new
markets for its oil after Western countries stopped buying as a
result of sanctions and other measures imposed after Russia's
invasion of Ukraine on Feb. 24 last year.
China imported 2.03 million bpd from Russia in January,
according to Refinitiv data, up from 1.52 million bpd in
December.
This made Russia the top supplier to China, overtaking Saudi
Arabia, with imports of 1.77 million bpd from the kingdom.
The two heavyweights of the OPEC+ group have played tag team
with each other for the position of top supplier to China since
the war started in Ukraine.
A question for the crude market is whether China's
increasing imports from Russia has a price implication for
global benchmarks such as Brent crude, given that Russian oil is
now largely disconnected from the world system.
While the market waits to see whether China's economic
re-opening and Beijing's stimulus measures do translate into
higher imports, it's worth looking at where there was strength
in Asia.
INDIA RECORD
India, the region's second-biggest importer, saw January
arrivals hit a record high of 5.29 million bpd, up from
December's 4.78 million bpd.
The data shows that Russia maintained its position as top
supplier, with January imports of 1.33 million bpd, up from 1.19
million bpd in December.
Prior to the war in Ukraine, Russia was a minor supplier to
India, but the availability of cheap oil from Russia's western
ports, which used to go mainly to European refiners, has seen
India ramp up imports.
Other major Asian oil buyers also saw gains in January, with
South Korea importing 3.11 million bpd, up from 2.85 million bpd
in December, while Singapore imported 1.65 million bpd, up from
910,000 bpd.
Japan was the exception, with January imports dropping to
2.83 million bpd from December's 2.96 million bpd.
The question is whether Asia's crude imports will be
maintained at high levels amid signs that higher interest rates
are starting to have some bite on consumer spending and on
export-dependent economies such as Japan and South Korea.
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GRAPHIC-Asia's crude oil imports vs Brent price: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(By Clyde Russell; Editing by Christopher Cushing)
Messaging: clyde.russell.thomsonreuters.com@reuters.net))
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