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China’s Crude Oil Imports: Tussle between the Bulls and Bears

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China’s crude oil imports   

In this part of the series, we’ll look at China’s crude oil imports over the long term.

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China’s crude oil imports 

  • On August 8, 2016, China’s General Administration of Customs department reported that China imported 7.3 MMbpd (million barrels per day) of crude oil in July 2016. This is 1.2% more than the same period in 2015. China imported 7.5 MMbpd of crude oil in June 2016. China’s crude oil imports fell for the second consecutive month. Imports fell due to the decline in demand from teapot refineries. However, China imported 7.5 MMbpd of crude oil in the first seven months of 2016. This was 12% more than the same period in 2015. This is bullish for the oil market.
  • S&P Global Platts surveys suggest that China’s crude imports in 2016 will average 7.4 MMbpd (million barrels per day), 10% higher than 6.7 MMbpd in 2015 due to demand from teapot refineries.
  • Slowing Chinese crude oil production due to aging oilfields and lower crude oil prices will also add to China’s crude oil imports.
  • China’s fuel exports rose to a record high in July 2016. The rise in fuel exports will boost refinery demand and support crude oil demand. China’s fuel exports rose by 52% in July 2016 compared to the same period in 2015. Market surveys suggest Chinese fuel exports will be strong in 3Q16.
  • The EIA estimates that China is planning to build 500 million barrels of strategic crude oil reserve space by 2020. This will also add to imports.

Impact on crude oil, energy stocks, and ETFs 

Higher crude oil imports from China will support crude oil prices. Higher crude oil prices will have a positive impact on the earnings of oil and gas exploration and production companies such as Bill Barrett (BBG) and Whiting Petroleum (WLL). They also affect ETFs and ETNs such as the Fidelity MSCI Energy (FENY) and the VelocityShares 3x Inverse Crude Oil ETN (DWTI).

For ongoing analysis, visit Market Realist’s Upstream Oil and Gas page.

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