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China’s Crude Oil Imports Could Impact Crude Oil Prices

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China’s crude oil imports

On March 8, 2016, China’s Customs Department reported that China’s crude oil imports hit a record. China’s crude oil imports averaged 8 MMbpd (million barrels per day) in February 2016. This is 27.4% higher than China’s crude oil imports in January 2016. China is the second-largest crude oil consumer in the world. It’s also one of the largest crude oil importers along with the US.

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What drove China’s crude oil imports?

The key drivers for China’s crude oil imports are listed below.

  1. The rise in demand from Chinese teapot refineries, due to strong refinery margins, supported the rise in China’s crude oil imports in February 2016.
  2. The fall in China’s crude oil production led to the rise in crude oil imports.
  3. Multiyear low crude oil prices motivated refiners to import more crude oil.
  4. Building strategic reserves also led to the rise in crude oil imports. China added 185 million barrels of strategic crude oil reserves, according to Reuters’ sources.

Forecast for 2016

China’s average crude oil imports were 6.71 MMbpd in 2015. Market surveys suggest that China’s crude oil imports could rise by 6.2% in 2016—compared to 2015. The oil demand is also expected to rise by 3.2% in 2016. In contrast, Reuters expects China’s crude oil imports to fall below 7 MMbpd in March 2016.

The recent 42% rally in crude oil prices benefits Chinese oil producers like CNOOC (CEO), China Petroleum & Chemical (SNP), and PetroChina (PTR). It also benefits US oil producers like Cimarex (XEC), Apache (APA), and Continental Resources (CLR). For more on US energy companies’ financial woes, read US Oil and Gas Companies’ Debt Exceeds $200 Billion.

ETFs  

ETFs and ETNs like the iShares Global Energy ETF (IXC), the iShares U.S. Oil Equipment & Services ETF (IEZ), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the iShares U.S. Energy ETF (IYE), the Vanguard Energy ETF (VDE), and the VelocityShares 3x Long Crude Oil ETN (UWTI) are influenced by the ups and downs in the oil market.

We’ll discuss Russia’s crude oil production in the next part of the series.

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