China Continues To Tap Crude Reserves Despite Plunge In Refining Activity

The world’s largest oil importer, China, is estimated to have drawn some crude from its oil reserves in July, although its refining throughput fell to the lowest level in over a year, Reuters columnist Clyde Russell has estimated based on official Chinese data.

Last month, China is likely to have used 223,700 barrels per day (bpd) of its crude inventories, Russell calculates in an estimate of China’s crude imports plus domestic crude oil production, minus the refinery throughput.

The estimates showed that Chinese oil refinery throughput was roughly 223,700 bpd higher than the combined available crude from imports and domestic production in July.

China’s crude reserves, strategic and commercial, have always been the subject of speculation and guesstimates since Beijing doesn’t report inventories.

Chinese refiners boosted crude imports at low prices last year, and continued to import high crude volumes at the start of this year.

However, the oil price rally in the second quarter of 2021 slowed down Chinese purchases, which hit a 2021-low in June at 9.77 million bpd. Crude imports reboundedin July, to 10.07 million bpd, or, according to Reuters, 41.24 million barrels for the month in total. Yet, this was still lower than the rate of imports a year earlier: in July 2020, China bought 51.29 million tons of crude.

Analysts—including Rystad Energy, Energy Aspects, and Independent Commodity Intelligence Services (ICIS)—estimate that the recent clampdown on the import and tax practices of independent refiners, as well as the significantly higher oil prices this year, could result in flat or only slightly higher crude oil imports in China in 2021.

Earlier this week, data out of China showed that the world’s top crude importer had the lowest refinery throughput in July 2021 since May 2020, as independent refiners cut on fuel production amid lower second-half import quotas and weakening profit margins.