China's oil buying frenzy slows on high stocks, limited quotas


China has hit the brakes on its oil buying spree as swelling inventories and limited import quotas stifle purchases.

By Muyu Xu and Florence Tan

BEIJING/SINGAPORE, Oct 16 (Reuters) - China has hit the brakes on its oil buying spree as swelling inventories and limited import quotas stifle purchases.

Softening Chinese demand in the final quarter of 2020 comes as renewed lockdowns and a spike in coronavirus cases across Europe and the United States curtail oil consumption, adding more downward pressure on oil prices LCOc1.

The world's top crude oil importer has been a critical market for oil producers forced to dump excess supplies at decades-low prices during the height of the COVID-19 pandemic.

"The recovery in China's demand has been very, very strong, and so if you remove part of that strength, that would have a bearish impact on the (global oil) market," said Lachlan Shaw, director, head of commodity research, markets at the National Australia Bank (NAB).

China was the only major crude consumer with increased oil demand in the April-September quarters from the year before.

It imported a record 2.108 billion barrels, or 12.8% of total global oil supplies, during that period, according to China customs and International Energy Agency (IEA) data.

Averaging 11.36 million barrels per day (bpd) in Q2 and 11.68 million bpd in Q3, that buying binge from April through September was 16.5% higher from the same stretch in 2019, and provided vital support to prices when the global economy tanked.

However, China's imports may now fall as much as 1.7 million bpd, or 14.5%, from the Q3 pace for the last three months of 2020, said Shi Fenglei, associate director at IHS Markit.

Seng Yick Tee, senior director with SIA Energy, estimates imports for the remainder of 2020 could fall by 1.2 million bpd from the third quarter, and down 785,000 bpd on year.

Refinitiv analyst Emma Li expects a more than 10% quarterly drop in imports, and a 5% year-on-year dip in Q4 to around 10 million bpd.


Record crude inventories following a 13% rise in oil imports from January through September will likely subdue import growth through the rest of the year.

Chen Jiyao, head of China client advisory at FGE, estimates that China's implied crude inventories grew by an average 1.7 million bpd between January and September. That growth rate will ease to 1-1.2 million bpd by year-end as inflows slow.

State refiners, which don't require import quotas, will likely be the main Chinese buyers in the fourth quarter as independent refiners have used up their 2020 allocations, traders said.

China's economic recovery from coronavirus lockdowns has spurred a pick-up in fuel use, and oil product demand will rise further to 13.53 million bpd in the fourth quarter, up from 13.27 million bpd, said Chris Page of Rystad Energy.

While China's demand recovery is welcome, NAB's Shaw said oil demand in countries of the Organisation for Economic Co-operation and Development, which accounted for nearly half of the world's consumption last year, will need to bounce back before prices can move higher.

Global oil demand by region during Q2 and Q3 2020

China's crude oil imports and refinery throughput

China's fuel exports

(Reporting by Muyu Xu in Beijing and Florence in Singapore; Additional reporting by Chen Aizhu Editing by Gavin Maguire and Jacqueline Wong)

((; +86 10 56692117;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at and via Reuters TV.

Learn More