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Lower refining margins, higher oil and fuel inventory levels, and a slower-than-expected increase in air travel have combined to push down oil demand in China, according to a Bloomberg report, with analysts expecting little change in the status quo in the coming months.
“Domestic demand has lost steam following the Golden Week holiday in October, and we don’t see any major supporting factors through winter,” the report quoted FGE analyst Mia Geng as saying.
That expectation comes as Beijing reported a monthly increase in oil imports last month along with an increase in fuel exports.
China imported 11.53 million bpd of crude in October, which was up by 13.5% on the year and by 3.6% on the month.
Fuel exports, meanwhile, added 16.07% in October, for a total of 5.17 million tons, up from 4.46 million tons a year earlier but down from 5.44 million tons in September.
At the same time, China’s crude oil inventories have started rising after shedding some 70 million barrels between late July and October, Bloomberg noted in its report, suggesting this signaled weakening domestic demand.
On the other hand, China normally dips into its crude oil stocks when prices are too high for refiners’ tastes, so there might have been a bit of this going on between late July and late October.
Fuel exports are set to fall further, and significantly, however. This is not because of any organic demand trends but because refiners have run out of export quotas. It could be suggested they have run out of quotas due to healthy demand for refined oil products but in any case, according to energy data provider OilChem, exports are set to drop by 40% this month from October.
This might be bad news for Europe, which is in a diesel crunch and China is one of its biggest suppliers of the critical fuel.
