MOSCOW (MRC) -- Chinese refiners dipped into crude oil inventories in April for the first time in 18 months, as high processing rates exceeded the volume of crude available from both imports and domestic output, said Reuters.
Refiners processed 61.1 million tons in April, equivalent to 14.87 million barrels per day (bpd), which was the second-highest on record and followed on from the all-time peak of 14.9 million bpd in March. The volume of crude available to refiners from imports and domestic output in April was 59.71 million tons, equivalent to 14.53 million bpd.
China doesn't disclose the volumes of crude flowing into or out of strategic and commercial stockpiles, but an estimate can be made by deducting the amount of crude processed from the total of crude available from imports and domestic output.
For April, the total amount of crude available was 340,000 bpd below the volume processed by refiners, the first time since November 2021 that refiners have drawn on inventories.
For the first quarter of 2023 China added about 770,000 bpd to either commercial or strategic storages, a rate that dropped to 480,000 bpd for the first four months as a result of the draw on inventories in April.
The question for the oil market is whether China dipping into stockpiles is the start of a new trend, or whether is was just a one-off driven by temporary factors.
On the processing side, it's clear that China's refiners are running their plants harder, to take advantage of rising domestic demand for fuels as the economy reopens from its COVID-19 lockdowns.
Refiners have also boosted exports of refined fuels having been granted additional quotas by the government as Beijing sought quick ways to boost economic growth and refiners saw opportunities to profit from strong margins for products in the first quarter, especially diesel.
While the domestic demand story remains largely intact, the high levels of product exports may start to taper in coming months for several reasons.
Refiners are likely to hold off exports in order to meet domestic needs, profit margins on refined fuels in Asia have fallen sharply in recent weeks, and Beijing's second round of export quotas are less than half of the first allocation.
Overall, the outlook for refining volumes in China remains strong, with the domestic market recovering and product exports likely to remain solid, even if below the huge volumes seen in the first quarter, when shipments jumped 59.8% from the same period in 2022.
We remnd, India's oil imports from Russia rose to a fresh record high in April, further reducing the share of Middle Eastern and African grades to their lowest level in at least 22 years. Refiners in India, the world's third-biggest oil importer and consumer, are on a Russian oil-buying binge after some countries shunned purchases from Moscow over its invasion of Ukraine in February last year.