Crude Imports to China Are on the Rise
August 9th, 2019
Crude oil and refined fuel products prices closed higher yesterday mainly driven by a large rise in China crude oil imports, a large rise in US equities, Saudi Arabia vowing to keep exports lower the next few months, Saudi Arabia wanting to discuss with OPEC members the recent price decline, and continued worries of supply disruption in the Middle East due to Iran.
Crude oil imports into China, the world’s largest importer of crude oil, rose by 14% for July 2019 versus July of 2018. This was much higher than expected and bullish for prices yesterday. However, refined fuel exports continue to rise due to lower internal fuel demand.
Also supportive to prices yesterday was the news that Saudi Arabia wants to meet with other OPEC members to discuss in detail the recent crude oil price decline into bear market territory. This has many speculating that Saudi Aribia wants OPEC to commit to further oil output cuts to balance the market. Saudi Arabia also vowed to keep their crude oil exports below 7 million bpd for August and September.
For the sixth consecutive month, US rail traffic tumbled in July compared to year-ago levels, according to Association of American Railroads data.
Nigeria has had its slowest sales month of the year in August for crude oil as US exports of competing light, sweet grades flood the traditional markets in Europe and Asia. The growth of US shale is changing the world oil markets. US oil exports surged 260,000 barrels per day in June to a monthly record of 3.16 million bpd.
The International Energy Agency this morning described the outlook for crude as “fragile” and trimmed its demand-growth forecast for this year and next. The IEA said, “There have been concerns about the health of the global economy expressed in recent editions of this Report and shown by reduced expectations for oil demand growth. Now, the situation is becoming even more uncertain: US-China trade dispute remains unresolved and in September new tariffs are due to be imposed. Tension between the two has increased further this week, reflected in heavy fall for stock and commodity markets. Oil prices have been caught up in the retreat, falling to below $57 per barrel earlier this week. In this Report, we considered the International Monetary Fund’s recent downgrading of the economic outlook: they reduced by 0.1% points for both 2019 and 2020 their forecast for global GDP growth to 3.2% and 3.5%, respectively. “The IEA’s data showed that global crude demand increased by just 520,000 bpd from January to May. It was the slowest growth since 2008. Crude demand in May was 160,000 bpd less than it was in May last year.
Several new pipe lines are set to open to bring crude oil from the Permian Basin to the Gulf Coast. These new pipelines are offering lower rates to try and attract barrels. EPIC Midstream and Plains Al America are opening lines that will have roughly 1.6 million barrel per day capacity. Some see this area getting to a point where it has too many pipes, “over-piped” which will lead to lower and lower pipeline fees.