Must-know crude oil tanker outlook: Some good news and bad news

Part 7
Must-know crude oil tanker outlook: Some good news and bad news (Part 7 of 10)

Why did China’s crude oil import growth dip to 2.0% in March?

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 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.

China Crude Oil ImportsEnlarge Graph

March crude imports

For March, China’s crude oil imports dipped to a five-month low of 5.54 million barrels per day (23.52 million tonnes), down 7.8% month-over-month and 2% increase year-over-year. The demand seemed sluggish, mainly due to the Chinese New Year holidays and as refineries were likely wary of high product stocks. This was followed by three months of high inbound shipments and gains in fuel product inventories. Partly driven by economic conditions, crude oil imports were significantly dented by seasonal factors. China’s fuel imports were 2.37 million tonnes, customs data showed. Meanwhile, first quarter imports increased 8.3% to 6.06 million barrels per day from same period a year ago.

Outlook for the second quarter: Muted growth

Looking ahead to the second quarter, crude runs and imports are likely to remain muted in the early second quarter, mainly since some major refineries will have scheduled maintenance in April to May.

Analysts project that demand for fuel transportation from China wouldn’t experience high growth. However, the outlook for refining capacity expansions may be positive, which the industry should view with cautious optimism, as the Chinese Government and its representative oil companies have proven they too can be austere when the market warrants.

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).

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