Crude Tanker Indicators: Positive sentiment (Part 4 of 5)
China crude imports
Being a rapidly growing economy with a large population of 1.35 billion people, China’s demand for energy is rising significantly and plays a major role in the crude tanker industry. Amid rapid expansion of economic activity and industrial output, China needs to supplement domestic energy resources with imported supplies on an ever-increasing scale. Seaborne imports of coal, oil, and gas into China account for 15% of the world seaborne trade.
Crude Imports data
Partly driven by Beijing’s pledge to boost infrastructure investment, such as the rebuilding of shanty towns and rail construction, crude oil imports for the month of June stood at 23.28 million metric tons (5.69 million barrels per day) increased 5% from the same month a year ago. However, on a month-on-month comparison, imports were down 10.7% as international crude prices spiked, while accidents and refinery maintenance also contributed.
For the first half of 2014, China imported 151.7 million tonnes of crude oil, up 10.2% from a year ago, customs data revealed, almost more than double the rate in 2013. Looking ahead, imports are likely to rebound in July mainly led by the combination of most of the refineries resuming work and a recent decline in crude prices. Besides, a Beijing based oil trader comments that the first six months high crude imports data suggests stockpiling including state petroleum reserves.
Middle-Eastern side of story
Currently, China China imports 55% of its oil, nearly half of which comes from countries in the Persian Gulf. In volume terms, that amounts to 5.3 mbd, or approximately 75% of Saudi Arabia’s production. China’s reliance on Middle Eastern oil imports has gradually increased in line with its ever-increasing demand for oil. At this point, China has reached the equivalent of the peak of U.S. import dependence and is showing no signs of slowing down.
From January to June 2014, imports from Iran stood at 627,742 barrels per day, an increase of 48% year-over-year, highest amount of crude China has ever imported from Iran in any first half in history. China, Tehran’s largest oil client, began stepping up purchases from the OPEC member after a preliminary nuclear deal in November 2013 eased some sanctions on Iran.
In its recent report, IEA estimates that the global oil demand will rise by 1.4 million barrels a day, the fastest pace in five years in 2015, as China leads gains in emerging economies. The agency estimates that Chinese demand will increase by 440,000 barrels a day in 2015, or 4.2%, to 10.87 million per day, as government support keeps economic growth above 7%.
Because China’s one of the fastest-growing economies, its oil imports will continue to have an important influence on 2014′s tanker utilization and rates and consequently on stocks like Frontline Ltd. (FRO), Teekay Tankers Ltd. (TNK), Nordic American Tanker Ltd. (NAT), and Tsakos Energy Navigation Ltd. (TNP) as well as the Guggenheim Shipping ETF (SEA).
Browse this series on Market Realist:
- Part 1 - Why the Baltic Dirty Tanker Index is nearing a 5-month high
- Part 2 - China auto sales supporting oil demand
- Part 3 - China PMI soaring to 27-month high
- Commodity Markets