BEIJING: China’s imports of crude oil offer a picture of which exporters are doing the heavy lifting of reducing supplies, and which countries are benefiting the most from the efforts of OPEC and its allies to rebalance the market. While looking at customs data from the world’s biggest crude importer isn’t a definitive study of global oil market dynamics, it’s important as exporters are well aware that China has been leading demand-growth in recent years, a trend likely to continue.
China imported 281.1 million tonnes of crude in the first eight months of this year, equivalent to 8.44 million barrels per day (bpd), according to customs data. This is up 12.3 percent on the same period in 2016, or about 950,000 bpd. This makes China the major contributor to global demand-growth so far this year, given that the International Energy Agency expects world oil consumption to rise 1.6 million bpd in 2017 from 2016. The breakdown of the Chinese import numbers shows who is gaining market share and who is not. Saudi Arabia was China’s leading supplier in the first eight months of 2016, but has slipped to third place behind Russia and Angola in the January-August period this year. The kingdom’s exports to China were 1.03 million bpd in the first eight months, down 1.7 percent from the same period last year. While this looks like a relatively small decline, it becomes far more significant if you assume that the Saudis had been able to grow their exports at the same pace as overall imports by China. If China’s imports of Saudi crude were up at the 12.8 percent overall growth rate, it would have meant that the kingdom supplied 1.18 million bpd. That’s 150,000 bpd more than what the Saudis actually supplied, and this is perhaps a good indication of how much the Saudis have given up by restricting their output in pursuit of rebalancing the global crude market and shifting prices higher.
The Saudis were one of the main drivers behind last November’s agreement by the Organization of the Petroleum Exporting Countries and allied producers, including Russia, to curb output by a combined 1.8 million bpd. This initial six-month deal was later extended to at least the end of March next year as it became clear the market was rebalancing slower than what the producers had hoped for, and prices remained locked in a relatively narrow band. Global benchmark Brent crude was at $56.71 a barrel in early Asian trade on Monday, not much higher than the $53.94 it closed at the day after OPEC and its allies announced their agreement last November.
