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How Do China’s Crude Oil Imports Impact the Crude Oil Market?

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China’s crude oil imports

China’s crude oil imports fell by 20% in January 2016—compared to December 2015. It’s the lowest Chinese crude oil import level since October 2015, according to Chinese customs data. China imported 6.29 MMbpd (million barrels per day) in January 2016. The slowing Chinese imports will have a negative impact on crude oil prices. It would also impact national and international oil producers like ExxonMobil (XOM), Occidental Petroleum (OXY), Total (TOT), Eni (E), and Shell (RDS.A). China is the second-largest crude oil consumer in the world after the US.

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China’s crude oil imports in 2015 

Historically low oil prices also impact Chinese companies like CNOOC (CEO), China Petroleum & Chemical (SNP), and PetroChina (PTR). China imported 6.71 MMbpd of crude oil 2015. Its crude oil imports peaked at 7.81 MMbpd in December 2015. China imported crude oil to take advantage of the lowest oil prices in 12 years. Secondly, demand from teapot refiners also boosted the imports. China is building huge strategic crude oil reserves. This also added to the crude oil imports. China has 185 million barrels of crude oil stocks compared to just over 500 MMbbls of crude oil stocks in the US. So, we could expect China’s crude oil imports to be strong in 2016 despite the slump in January 2016. However, the weak Chinese yuan and slowing Chinese economy could influence crude oil imports.

China’s refined products export 

China is importing crude oil to take advantage of lower crude oil prices and the higher crack spread. As a result, it refines crude oil and sells it in the secondary market. China exported refined products like diesel and gasoline. The fuel exports were at 680,000 barrels per day in January 2016. In the next part of this series, we’ll discuss how hedge funds are playing the global oil market.

ETFs 

The volatility in the oil market impacts ETFs like the VanEck Vectors Global Oil Refiners Index (CRAK), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), and the VanEck Vectors Oil Services ETF (OIH).

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