MOSCOW (MRC) -- China's crude oil imports could rebound by 6-7% this year, reversing 2021's rare decline as buyers step up purchases for new refining units and to replenish low inventories, reported Reuters with reference to analysts and oil company officials' statement.
Robust demand from China, which accounts for a tenth of the global crude trade, would help underpin global oil prices, keeping supplies tight amid forecasts for a jump in crude prices.
Demand recovery, however, is not expected until the second half of the year as China continues to combat COVID-19 outbreaks and limit production by smaller refiners.
For 2022, crude oil imports into China look set to grow by 600,000-700,000 barrels per day (bpd), offsetting last year's 590,000 bpd fall to match or beat 2020's record volume of 10.85 million bpd, analysts at FGE, Rystad Energy and Energy Aspects told Reuters.
Brent and West Texas Intermediate futures are already at 7-year highs near USD90 a barrel as investors look beyond the demand hit from the Omicron variant.
"We expect China's refinery runs to grow by 500,000 bpd, mainly driven by new refinery capacity coming online in 2022 and the recovery in transport and aviation fuels picking up the pace in the second half of the year," said Julie Torgersrud of Rystad Energy.
Imports are likely to make a slow start initially as Beijing's zero-tolerance virus control measures keep a lid on fuel demand, while reduced import quotas and narrowing refining margins will limit production by independent refiners.
Refinitiv data showed January arrivals totaled 41.13 million tons (9.69 million bpd), below 44.6 million tons in January 2021 and 46.1 million tons two years ago.
A possible release of state petroleum reserves (SPR) in coming weeks will also dampen national oil companies' purchases, analysts said.
Demand is set to recover later in the year, driven by new refining capacity at integrated petrochemical producers, in particular Zhejiang Petrochemical Corp and Jiangsu Shenghong Petrochemical.
"We expect crude imports to grow by 600,000 bpd year-on-year, driven by new capacities and a return of stockpiling," said Mia Geng, analyst with FGE.
The restocking of oil reserves is also expected to boost buying in the second half, led by state refiners Sinopec and PetroChina after an estimated steep inventory drawdown last year.
Total onshore crude oil stocks, excluding underground storage which is hard for satellites to detect, fell by 140 million barrels last year, Vortexa Analytics estimated, which a market source said was likely the largest drawdown since 2015.
China began refilling tanks in recent weeks, putting 4 million barrels of Iranian oil nL1N2U105C into reserve tanks in south China, Reuters reported.
Unipec, Sinopec's trading arm, has also been sweeping up millions of barrels of crude from the United States, Russia and the Middle East this month in an unusual buying spree, traders said. The extra supply could be used to ramp up refining output after the Lunar New Year and to refill stockpiles, they said.
As MRC wrote before, in December 2021, Amur Gas Chemical Complex LLC agreed and signed loan documents to finance the completion of Amur GCC’s construction. Amur GCC will act as the borrower; SIBUR and Sinopec will be sponsors proportional to their stakes (60/40, respectively) in the joint venture (JV). Upon completion of standard conditions precedent, AGCC will begin to draw on the loan which will total USD USD9.1bn and has a final maturity of 2035. Project costs in excess of USD 9.1bn will be covered by the JV parties pro rata.
Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,265,290 tonnes in the first eleven months of 2021, up by 14% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,363,850 tonnes in January-November, 2021, up by 25% year on year. Supply of homopolymer PP and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding PP random copolymers decreased significantly.