MOSCOW (MRC) -- Crude oil sales from storage tanks around Singapore rose to an 11-month high in March, with nearly half of the volumes going to China and traders clearing inventories ahead of record shipments to Asia expected to arrive in April, said Reuters.
Traders sold a total of 22.6 MMbbl of crude from storage in Singapore, southern Malaysia and northern Indonesia in March, Thomson Reuters Eikon trade data showed. Around half of the volumes went to China, partly to help quench the still-growing demand from the country's independent refiners.
"Strong demand from the teapots played its part, as they feared delays to their June quota renewal, and so (they) over-bought during Q1 2017," said Virendra Chauhan, oil analyst at Energy Aspects.
China started granting independent refiners, sometimes called teapots, crude oil import rights from 2015, resulting in a surge of overseas orders in 2016. That has continued into this year, with China's overall March crude imports hitting a record at nearly 9.2 MMbpd.
Despite the large sales this pulled from Singapore storage, the inventory drawdown does not necessarily indicate that an effort led by the Organization of the Petroleum Exporting Countries (OPEC) to cut production to tighten supplies and prop up prices is bearing fruit.
"It's too early to say (if this means the OPEC output cut is working). Of course China buying almost 600,000 bpd more crude in Q1 2017 has helped, but we don't see that as a sustainable pace of growth," Chauhan said.
There are also concerns that while China's surging imports eat up crude volumes, they may contribute to a fuel overhang as Chinese refiners churn out more products like gasoline and diesel than the market can absorb.