Must-know: Crude oil indicators showing high positivity (Part 3 of 6)
China records a drop in import data
Being a rapidly growing economy with a large population of 1.35 billion people, China’s demand for energy is rising significantly and playing 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
China’s economy is slacking—set to grow at its slowest pace in 23 years. The economy has caused its oil demand to drop to a seven month low in April as refineries scaled back production for maintenance and continued to export surplus fuel.
In the first five months of 2014, China imported 128.7 million tons of crude oil—up 11.1% from a year ago, customs data revealed. For the month of May, China imported 6.14 million barrels per day (or bpd) of crude oil—an increase of 8.9% from last year.
However, on a month-on-month (or MoM) comparison, it was down 9.4% from a record high of 6.78 million bpd in April, 2014, as refineries cut production during the peak maintenance season. According to industry sources, PetroChina shut its largest 410,000-bpd Dalian refinery for maintenance from April 10 to late May.
Also, stricter bank requirements for trade loans have dented import orders to some degree. Adding to it, high stocks and a poor import arbitrage also kept buyers away.
Customs data showed that net fuel exports in May, 2014, were 410,000 tons, or 92,580 bpd, compared to net imports of 340,000 tons in April and 1.25 million tons last year.
In its May report, the International Energy Agency (or IEA) forecast that China’s total oil demand would log an increase of 355,000 bpd, or 3.5%, for 2014. Analysts reveal that imports should remain at elevated levels on the back of stockpiling in commercial storage or strategic reserves. The IEA added that the expected near 7.5% growth in the world’s second biggest economy should support relatively strong gains in gasoline, jet fuel, and petrochemical products.
Because China’s one of the fastest-growing economies, its oil imports will continue to have an important influence tanker utilization and rates in 2014. It will also impact 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 reflecting a trend uptick
- Part 2 - Why allowing crude oil exports has impacted U.S. economic growth
- Part 4 - Why China’s car sales are driving global oil demand
- Commodity Markets
- Singapore International News