(Bloomberg) -- Oil bulls hoping for a second-half demand spurt from China are likely heading for disappointment as economic weakness persists and the adoption of new energy vehicles continues apace.
China’s crude imports over the last six months of 2024 are projected to be flat or marginally higher than a year earlier, according to a Bloomberg survey of four forecasters. That would be an improvement on the first half, but not enough to soak up additional supply as OPEC+ seeks to restore more barrels to the market.
The world’s biggest oil importer is grappling with a prolonged property crisis and ailing consumer confidence that’s weighed on energy demand, while electric and natural gas-powered vehicles chip away at traditional fuels. Crude imports fell 2.3% in the first six months, the biggest half-year drop outside of Covid years.
“With downstream demand looking consistently weak, I’m inclined to cut to flattish,” said Amy Sun, a consultant at thinktank GL Consulting in Guangzhou, referring to her projection for second-half crude imports.
Sun’s forecast for 11.4 million barrels a day of imports in the second half is the most bullish of the four estimates, and is based on higher flows to Shandong Yulong Petrochemical Co.’s new refinery. Kpler Ltd. had the lowest estimate — at 10.7 million to 10.8 million barrels a day — but that only includes seaborne imports.
The estimates compare with 11.23 million barrels a day of Chinese imports in the final six months of 2023. Most of that arrived by ship, including from Iran and Russia.
China’s ruling Communist Party has vowed to roll out a batch of new measures to support the economy at an appropriate time, and pledged to make boosting consumption a greater focus, the official Xinhua News Agency reported.
Some independent refiners have reduced operations as higher costs squeeze refining margins, trimming their appetite for oil. The market will be watching Beijing’s allocation of import quotas over the second half, which may provide insight into the nation’s crude demand outlook.
Spot purchases have picked up recently, however, and state-owned refiners have raised their operating rates to near a two-month high.
China could take advantage of softer oil prices to replenish its strategic reserves, according to Viktor Katona, an analyst at Kpler, which would provide a short-term import boost.
The broader energy demand outlook remains sluggish though. China’s overall fuel consumption may fall by 3.8% in the second half from a year earlier, industry journal China Petrochem said this month.
China National Petroleum Corp., the nation’s biggest energy producer, said earlier this year that Chinese oil demand had entered a “low-growth phase” as the post-pandemic recovery fades and the adoption of new energy vehicles increases.
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This Week’s Diary
(All times Beijing unless noted.)
Tuesday, July 30:
- Antaike hosts base metals summit in Beijing, day 1
Wednesday, July 31:
- China official PMIs for July, 9:30am
- CCTD’s weekly online briefing on Chinese coal, 3pm
- Antaike hosts base metals summit in Beijing, day 2
Thursday, Aug. 1:
- Caixin’s China factory PMI for July, 9:45am local time
Friday, Aug. 2:
- China weekly iron ore port stockpiles
- Shanghai exchange weekly commodities inventory, ~3:30pm local time
(Updates with China’s pledge to boost economy in the seventh paragraph.)
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