<

Why are important crude tanker indicators trading sideways?

Part 5
Why are important crude tanker indicators trading sideways? (Part 5 of 5)

China’s crude oil imports decline after high inventory stocking

China crude imports

Since China has a rapidly growing economy with a large population of 1.35 billion people, China’s demand for energy is rising significantly. This demand 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.

China Crude Oil ImportsEnlarge Graph

Crude imports data

Crude oil imports for July declined 9% year-over-year to 23.76 million metric tonnes (5.6 million barrels per day)—the lowest daily level since March. This fall was mainly due to subdued demand growth leading to speculation of stockpiling by the world’s largest energy consumer in early 2014.

Meanwhile, imports recorded a 1.1% decline on a daily basis from June 2014 levels, further denting expectations for a rise after Chinese refineries returned from a peak maintenance period in April and May.

For the first seven months of 2014, imports increased 7.2% compared to the same period a year ago. For the first half of the year, China generated a surplus of more than 500,000 bpd as per Chinese government data. Analysts believe that high crude imports, which are still higher than the level necessary to meet demand, suggests stockpiling in commercial storage or even the country’s strategic petroleum reserves (or SPR), whose second phase is expected to be completed in 2015.

Outlook

In its recent report, the IEA revised its growth forecast for China’s oil demand to 3.3% in 2014. China’s trade surplus surged to a record in July as export growth unexpectedly accelerated and imports fell. This suggests that the U.S. and European recoveries will help sustain expansion in the world’s second-largest economy, further supporting the shipping industry.

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).

The Realist Discussions