MOSCOW (MRC) -- China’s massive build-up of crude oil inventories this year slowed somewhat in July, but remained elevated by historical standards as imports stayed near record levels, said Hydrocarbonprocessing.
One of the few bullish spots in the global oil market this year has been China’s ravenous appetite for crude, with imports for May, June and July being the highest three months on record. And, after a blip caused by lockdowns in the first quarter to combat the spread of the novel coronavirus, refinery processing has also been ramped up to record levels.
What is less visible is that China has been adding to its crude oil stockpiles at a record pace as well. China doesn’t disclose flows into the nation’s Strategic Petroleum Reserve (SPR) or commercial storage tanks, but an estimation can be made by deducting the amount of crude processed from the total amount of crude available from imports and domestic output.
China’s crude imports in July were 12.08 million barrels per day (bpd), while domestic output was 3.88 million bpd, giving total available crude of 15.96 million bpd.
Refinery throughput was 59.56 million tonnes, the highest for a single month, although in barrel-per-day terms the 14.03 million bpd in July was just below the record 14.08 million bpd achieved in June.
Subtracting the July refinery throughput from the total available crude leaves a gap of 1.92 million bpd, which likely flowed either to commercial storage or the SPR. This is down from the 2.77 million bpd gap seen in June, but is in line with the average of 1.95 million bpd for the first seven months of the year.
This is more than double the flows into storage seen in the first seven months of 2019, when there was a gap of 940,000 bpd between total available crude and refinery processing. The leap in storage flows so far in 2020 can be broken into two phases, the first being when China didn’t cut import volumes even though domestic fuel consumption took a massive hit during the COVID-19 lockdowns of the first quarter.
The second was the huge buying of cheap crude during the brief March-April price war between the two leading exporters of the OPEC+ group, Saudi Arabia and Russia. That crude started arriving in late May and the last of it should be discharged this month.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.