China’s Oil Trade Tailwinds
China’s Oil Trade Tailwinds
Chinese oil imports are up 3.5 MMbpd vs last year’s lows and provide the clearest read on strengthening domestic demand.
This post continues my efforts to dig into Chinese petroleum statistics, this time focused on the trade channel and, since my last major post on China, now benefiting greatly from the addition of tanker tracking data from Vortexa (link to my Vortexa contact; clicking helps support my research!)
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Russian production and Chinese demand continue to be the major storylines for oil market balances through 2023; this piece examines the latest Chinese trade data in the context of widely divergent demand outlooks for the year, which range from cautiously optimistic to megaboom.
It is clear that Chinese petroleum imports have made a strong recovery as of March 2023, up a staggering ~3.5 MMbpd over last year’s COVID-zero inspired lows—but can we call this a megaboom?
Trade flows are the most objective way to monitor the incremental demand impulse driven by the world’s largest oil-importing nation given that China lacks official consumption statistics; high-frequency tanker tracking indicates a minor pullback in April from those March highs, but flows remain well above 2020 and even 2021 levels.
Crude’s bull-run last year was stymied by two big storylines: Russian production defying expectations of a historic collapse and Beijing crushing Chinese petroleum demand with its draconian COVID-zero lockdowns. A year later, those same two Sino-Russian themes continue to dominate the outlook. A couple weeks ago, I reviewed the latest Russian production estimates in How Real is Russia’s Production Cut?, concluding that production may be finally, measurably falling despite good reason for continued skepticism. Today, I am exploring China’s demand rebound coming out of last year’s COVID-zero lockdowns through the lens of trade flows.
Chinese crude oil imports rebounded decisively at the end of last year after sinking to the lowest sustained level since 2018 through its COVID-zero summer of 2022. Now in 2023, imports have continued to post substantial gains with seaborne imports rising to their highest level since the high-water marks set in summer 2020/early-2021, ~3.5 MMbpd above the low points of last summer. Going forward, I anticipate a continuation of this trend recovery—perhaps not as strong as March but maintaining solid gains over 2021/22 levels—as Chinese travelers take to the skies this summer to jetset domestically and, even more critically, abroad for the first real time since before the pandemic rocked the market.
So, let’s break down the state of China’s petroleum trade to better understand just how bearish, or bullish, these recovery trends really are.