China's crude imports rose to the highest level this year in September, underscoring robust demand from refiners, as many have ended their annual maintenance, and the country's expanded storage capacity.
In September, China imported 33.06 million metric tons of crude oil, or a year-over-year rise of 18%, around 8.08 million barrels a day, preliminary data from the General Administration of Customs showed Thursday. The amount is also the second highest on record after the 33.18 million tons seen in December.
China, the world's second-largest energy consumer, has been a major guzzler of crude at a time of oversupply and rivals the U.S. as the top oil importer.
The bulk of China's imports is attributed to a growing batch of independently owned refineries that the government has recently allowed to directly import crude. In the past, teapot refiners mainly used fuel oil as their main feedstock. Those who used crude oil had to source the barrels from state-owned energy companies.
The elevated imports are also a reflection of China's dwindling crude production. In August, China's crude production fell 10% year over year to 16.54 million tons, or 3.9 million barrels a day. In the first eight months of the year, the country's production was down 5.7% compared with the same period last year.
Stockpiling also drove China to increase its foreign crude buying in September, said Energy Aspects analyst Virendra Chauhan, who noted that a 7.5 million-barrel storage facility in China's northeastern Qingdao Port was recently opened.
An additional 19 million barrels of storage also came online on Aoshan Island, which received two shipments in September, the analyst said.
"Crude buying may slow in October, but overall fourth quarter should stabilized around 7.6 million barrels a day due to declining domestic production and stockpiling," he added.
The jump in crude imports, however, doesn't necessarily reflect a rise in China's domestic oil consumption, said Nelson Wang, a China analyst at investment bank CLSA.
He pointed out that a number of Chinese refineries, such as Sinopec Shanghai Petrochemical Co. SHI, +0.26% are buying crude and processing the feedstock on order on behalf of another oil company. The most recent annual report shows that in the first six months of this year, around 18% of the company's crude processing was on order.
Analysis by S&P Global Platts shows China's apparent oil demand contracted 4.3% year over year in August to 10.76 million barrels a day, mainly because of a contraction in demand for gasoil, fuel, oil and gasoline.
"It is likely that if exports of oil products continue unabated, overall apparent demand for the whole of 2016 could be lower than in 2015," said Song Yen Ling, senior analyst with Platts China Oil Analytics.
"Chinese refiners have typically built product stocks toward the end of the year, but ongoing oversupply in the domestic market could mean that exports will be sustained," she added.
In September, China's refined-oil product imports totaled 1.93 million tons, a decline of 29% year over year, as domestic need for industrial fuels such as diesel continue to fall along with the country's ebbing industrial activities growth. In recent months, China has also been exporting unwanted barrels. China exported 4.3 million tons of oil products in September, a year-over-year rise of 21%.
CHINA SPENT $43.43/BARREL AVERAGE DURING SEPTEMBER.http://www.reuters.com/sectors/energy