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Why did China import record quantities of oil?

Oil markets are witnessing a state of stability, to continue their activity without any major shocks during the last six months, but this stability is mostly due to China, whose oil imports could witness a sharp decline by the end of the year.

Writer Igor Nedelkin, in a report published by the Russian “expert” magazine, says that energy markets have not been able to recover from the collapse they suffered from last spring, as the Corona virus crisis continues to affect oil demand. From achieving some balance, the main factor in this was not only the reduction in production from OPEC Plus countries, but also China’s willingness to buy.

In recent months, China has played a big role in supporting the recovery in the world by importing large quantities of black gold, the highest since last May, which is indicated by the official figures of the Chinese customs authorities.

During the past five months, China’s imports of crude oil did not fall below 11 million barrels per day, and in June they reached 12.9 million barrels per day, a figure that exceeded the highest level reached in May by a difference of 1.5 million barrels.

Congestion in Chinese ports has begun to ease, indicating that imports will return to their normal levels in the coming months (Reuters)

Imports rise

These data continue to confirm the presence of a tangible rise in imports, while Chinese ports are busy unloading cargoes that may have been waiting in line for several weeks, but in the rest of Asia, energy demand does not show any real recovery, and the main problem is still weak profit margin. What oil refining facilities can achieve.

For their part, analysts and experts ask one important question, which is “How long will China continue to support the fuel markets in the entire world on its own?” In addition, we must not forget that the second wave of the Corona virus has hit almost all developed countries, which resulted in It has negative effects on the recovery of the economy.

The writer believes that the problem that raises concerns now is that the reason for the unprecedented demand by China for basic oil was the activity of refining facilities in April and May, when prices fell to their lowest level in 15 years. Unsurprisingly, the Chinese were quick at that time to seize the opportunity and to buy cheap fuel in record quantities.

Data from the Chinese customs authorities indicate that these purchases continued during the entire summer season, because the deals were concluded in the spring and oil-loaded tankers did not arrive until the following months, and there were a large number of ships in Chinese ports, which led to lengthening the queue to be able to unload Its load.

The unprecedented demand by China for oil is mainly due to the activity of refining facilities following the drop in (European) prices.

The end of the buying wave

And now, according to the American “Oil Price” website, which specializes in energy news, this congestion in Chinese ports has begun to ease, which indicates that imports will return to their normal levels in the coming months. In other words, this means that the peak of Chinese oil imports is moving towards Its end.

According to experts, China will most likely finish receiving the quantities of oil that it had previously contracted to buy, by the end of October, at a rate of 636,000 barrels per day, which is the quantities that were postponed from September to this month.

This information poses a new problem, as most traders and refining facility owners have exhausted the import quotas that the Chinese government allows for the year 2020, and therefore they will be forced to suspend their activities for the rest of this year.

Based on these factors, the writer concluded that Chinese oil imports will not be able to achieve growth at the end of the year, and no record numbers should be expected, and in the face of declining demand in Europe in the presence of painful measures and restrictions imposed by governments, this factor will increase pressure On global markets.

On the other hand, global oil production will start to rise, as Libya began to restore its ability to operate oil fields, and the number of extraction platforms in the United States began to rise in the past weeks, indicating the return of life in the shale oil sector.




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