LAUNCESTON, Australia, Jan 20 (Reuters) - China's surplus crude oil eased slightly in December, but the excess surged in 2024 to more than 1 million barrels per day (bpd) as refiners gobbled up cheaper Russian cargoes.
China, the world's biggest crude importer, had excess crude oil of about 1.5 million bpd in December, down from 1.77 million bpd in November, according to calculations based on official data.
For 2024, the surplus of crude was 1.15 million bpd, up from 760,000 bpd in 2023, meaning that refiners likely have strong inventory levels, giving them options on how to deal with the recent spike in oil prices.
China does not 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.
The total volume of crude available in December was 15.48 million bpd, consisting of imports of 11.27 million bpd and domestic production of 4.22 million bpd.
Refineries processed 13.98 million bpd in December, leaving a surplus of 1.5 million bpd available for commercial or strategic storages.
For the year as a whole, China's total available crude was 15.28 million bpd, while refinery throughput was 14.13 million bpd, leaving a surplus of 1.15 million bpd.
It is worth noting that not all of this surplus crude is likely to have been added to storage, with some being processed in plants not captured by the official data.
But even allowing for gaps in the official data, it is likely that China has been importing crude at a far higher rate than it needs to meet its domestic fuel requirements.
This is the case even though 2024 crude imports were 11.04 million bpd, down 210,000, or 2.1%, from 2023.
Domestic oil output rose 1.8% in 2024 to 4.24 million bpd.
Refinery throughput also fell in 2024 for the first time in more than two decades, excluding the pandemic-hit year of 2022, with 14.13 million bpd processed, according to data released on Jan. 17 by the National Bureau of Statistics.
FUEL DEMAND
Refineries processed less crude as demand for gasoline was limited by the rapid switch to what Beijing terms new energy vehicles (NEVs), which include electric cars and hybrids, with more than 50% of new car sales now being NEVs.
Diesel demand was also hit by the increasing use of trucks powered by liquefied natural gas and by ongoing weakness in the construction sector.
With the trend toward NEVs likely to accelerate, it is possible that China won't see much increase in gasoline demand.
This may be the case even if the world's second-biggest economy does start to regain economic momentum amid ongoing stimulus measures, and also does avoid any damage from expected tariffs from the new U.S. administration of President-elect Donald Trump.
For 2025, this means that China's refinery processing may struggle to show much increase, with the most likely area of strong growth likely to be in petrochemicals, but this may not be enough to offset soft demand in gasoline and diesel.
PRICE HIT ON IMPORTS?
What does this mean for China's crude imports in 2025?
The prevailing market consensus is that they will recover from 2024's decline on the back of a stronger economy.
But there are some obstacles to this actually occurring, and the main one is higher oil prices.
Global benchmark Brent futures have risen sharply since Jan. 9, mainly as a result of new U.S. sanctions on Russia's so-called "shadow fleet" of tankers that largely deliver crude to China and India.
Brent reached a high of $82.63 a barrel on Jan. 15, the most since July last year and up 7.4% from the close of Jan. 9. The contract was at $81.15 in early Asian trade on Monday.
China's refiners have a well-established pattern of trimming imports when they believe crude prices have risen too high, or too quickly.
Conversely they tend to buy more than they intend to process when they believe crude prices are cheap on a relative basis.
Last year saw the buying of excess crude as crude prices declined, with Brent on a downtrend from its 2024 peak of $92.18 a barrel on April 12 to the low of $68.68 on Sept. 10.
From that low Brent traded largely sideways at around $75 a barrel until the new sanctions on Russia.
Given that China's refiners likely have strong inventory levels, and some have lost access to cheaper Russian oil, it is likely that they will choose to dip into storage in coming months rather than pay the current high prices.
While cargoes for January and February delivery are already locked in, there could be some paring of imports by March and April.
The views expressed here are those of the author, a columnist for Reuters.
Editing by Muralikumar Anantharaman
Source: Reuters