Crude oil imports in Asia, the world’s leading importing region, showed a notable recovery in August after hitting a two-year low in July.
China, the top global crude oil importer, is estimated to have increased its imports by over 1 million barrels per day (bpd) from July. Other major Asian importers—India, South Korea, and Japan—also experienced a rise in imports from the low levels observed in July, according to data from LSEG Oil Research, as reported by Reuters columnist Clyde Russell.
This rebound in imports is partly attributed to seasonal demand. Importers often boost purchases in the third quarter to build up fuel supplies for the peak winter demand. Additionally, lower oil prices likely played a role. August shipments were probably contracted in early June when Brent Crude prices fell to $76-$77 per barrel.
China’s oil demand has been weaker than anticipated. Therefore, the drop in international prices might have influenced the country’s August purchases more than an actual increase in demand.
Looking ahead, the critical question is whether the higher oil prices in early July—when Brent Crude topped $85 per barrel—dissuaded refiners from increasing their purchases for September. The answer will become clearer in the coming months. How China and other major Asian importers fare will significantly impact oil prices for the remainder of the year.
In August, Asia is estimated to have imported 26.74 million bpd of crude oil, a 2.18 million bpd increase from July’s two-year low, according to LSEG Oil Research.
July saw Asia’s crude oil imports drop to their lowest daily level since July 2022. In India, the world’s third-largest crude importer, the decline was attributed to seasonal factors and reduced demand during the monsoon season. However, Chinese consumption has disappointed this year, raising concerns about second-half demand amid a weak economy, a persistent property crisis, and sluggish fuel consumption.
The recent earnings report from China Petroleum and Chemical Corporation (Sinopec), Asia’s largest refiner, confirmed market worries about weak fuel demand in China. Despite a 1.7% increase in net profit for the first half of the year, driven by higher domestic crude oil and natural gas production and rising international oil prices, Sinopec’s refining metrics deteriorated compared to the previous year. The company highlighted “severe challenges from weak market demand and narrowing margins for certain products.”
For August, LSEG Oil Research estimates China’s crude oil imports at 11.02 million bpd, up from 9.97 million bpd in July, according to official Chinese customs figures. This increase may be more a result of lower oil prices in early June rather than a significant improvement in Chinese oil demand.
Year-to-date, China’s commodity imports have been closely tied to international price trends. Despite ongoing economic challenges and a property crisis, China’s imports of LNG, coal, copper, and iron ore surged in the first half of 2024. This suggests a pattern where China’s import activity is inversely related to the price trends of these commodities.
China’s strategy of purchasing crude oil at the lowest possible price is well-known, which partly explains its growing dependence on Russian crude, now embargoed in Western markets.