China oil demand rising but capped by collapse of export markets
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Chinese oil demand is about to ramp up as its refiners get back to work, but that growth is being capped by the large slowdown in exports.
Fuel producers are about to lift the amount of crude oil they use by 755,000 barrels per day (bopd) in April, or 10 per cent more than in March, according to data collated by Reuters.
It said domestic fuel demand was picking up again.
The Reuters data showed demand for diesel was rising fastest as manufacturing and industrial activity comes back online, but capped by the large decline in export orders.
It also said the rebound was modest because the country’s trading partners were still struggling to tame their own COVID-19 epidemics.
The imports are largely to feed its growing and hungry refining industry: the 400,000 bopd Hengli started in Liaoning province and the 200,000 bopd Zhejiang Petrochemical started in Zhejiang province last year.
As a result its demand drives a considerable amount of movement in oil prices, mainly the North Sea benchmark Brent.
Chinese oil demand fell by 20 per cent or about 3 million bopd by early February due to COVID-19 shutdowns and it was to this that OPEC was reacting when Russia and Saudi Arabia fell out over further production cuts.
This is important for the ASX’s Australia-based oil producers, such as Triangle Energy (ASX:TEG) and Buru (ASX:BRU), and even the odd US-based ones like Otto Energy (ASX:OEL), which sell their oil under Brent pricing.
Brent prices surged in September to a four-year high of $US86 ($127) a barrel after a drone attack on a Saudi oil facility, but rapidly returned to $US57.41 two weeks later after the market realised there was no imminent supply risk and attention returned to China.
On Monday, Brent prices bounced out of the $US20 range to reach $US33. The US benchmark WTI was at $US27.