China’s crude oil imports touch record highs, supporting tankers

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China buys more oil from abroad

With rising energy demand from the economic powerhouse of Asia, China has been buying more oil from abroad amid a slowdown in the economy’s growth rate. China ‘s gross domestic product growth in the third quarter narrowed to 7.3%, its weakest rate in five years.

China crude oil

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China crude imports

According to data from the National Bureau of Statistics (or NBS), domestic crude production has been virtually flat since 2010 at about 4.1 barrels per day (or bpd). However, Platts reports that China’s net imports of crude oil in 2014 has taken a more bullish track, climbing 8.8% through September to 6.1 million bpd. Imports in September were the second-highest on record despite slowing demand this year.

In October, apparent oil demand increased by 7.4% percent from a year earlier to 10.35 million bpd—its strongest gain in 15 months, according to Platts. Apparent demand varies from country to country. In China, apparent demand is defined as refinery output plus net product imports, adjusted for fuel oil and direct crude burning, smuggling, and stock changes.

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Driving factors for high imports

In order to build commercial inventories and fill its strategic petroleum reserves, China is recording higher imports by taking advantage of falling prices. During the nine months leading up to October, Platts calculated that China has been putting an average of 391,000 bpd into storage, which is almost 80% more than the same period a year ago.

Platts estimated earlier that China had added an average of 665,000 barrels to its inventories in September. The world oil market scenario is difficult to interpret with China amassing crude oil inventories.

China’s oil imports will continue to have an important influence on 2014 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). It will also affect the Guggenheim Shipping ETF (SEA). China’s rising crude import data indicates a positive impact on the industry and on these companies.

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