Thursday, March 12, 2009
China crude imports fall again as stocks near max
Thursday, 12 March 2009
China's crude oil imports fell by a steep 15 percent in February, a second successive decline as swollen stocks forced refiners to slow purchases, although rising fuel imports suggested demand was picking up. China imported 11.73 million tonnes of crude oil last month, or 3.06 million barrels per day, preliminary data from the customs department showed on Wednesday, a marginal increase from January, when imports fell 8 percent to an over two-year low.
For the first two months, crude imports fell 13 percent to 24.55 million tonnes, the General Administration of Customs said in its Web site (www.customs.gov.cn), the biggest two-month decline period since the start of 2005.
The fall may suggest that refiners -- and the government -- have simply run out of room to store more oil, despite Beijing's call to stock up key resources this year and a new fuel price scheme that encourages refiners to ramp up operations.
"We started to fill up tanks when crude was around $80 last October, but who then expected the economic crisis to become so bad?" said a trader with Sinopec, China's biggest refiner.
"Now the domestic demand is weak, and also we don't have that many storage tanks avaialable, why should we keep pumping in?"
However a rebound in imports of refined fuels offered a small sign of hope for underlying demand in the world's second-largest oil consumer, where implied demand contracted in the last quarter of 2008 as a global recession took hold.
Net fuel imports surged by half in February over January and were up over a quarter compared with a year earlier as refiners stepped up product imports, suggesting lower runs had helped whittle down fuel stocks while crude tanks bulged.[ID:nPEK180090]
While some economic indicators are beginning to flag the possible start of a recovery, signs are mounting of improved end-user oil demand as well. Sinopec Corp's chairman said last week that February sales were up 10 percent versus December.
STOCKED UP
The cut in crude imports followed a surge in inventories last year, as data released last week by China OGP, a publication under official Xinhua News Agency, showed China's crude stocks jumped a third last year to cover about 34 days of demand.
And this week a senior shipping executive said that he was urging Beijing to invest in tankers to use as floating storage because the government's four newly built strategic crude oil reserve tanks -- which can hold 100 million barrels -- are full, the first public acknowledgement of their status.
And Sinopec Corp will boost both crude and refined oil reserve sharply this year to take advantage of affordable global markets, a company adviser said on Tuesday.
But the refiner appeared to be pacing down after bumper purchases in late 2008, in absence of a marked demand recovery.
"Poor sales and high inventories of refined fuel seen in December and January may have dragged down crude imports in," said Qiu Xiaofeng, an analyst with China Merchants Securities.
The slowdown in purchases was despite a rebound in refinery outputs as plants were encouraged by a new fuel pricing scheme in place since beginning of 2009 that warranted a refining margin.
A Reuters survey found the country's top dozen oil processors raised throughput by 5 percent in February, the first increase in four months and they were seen extending the production rate into March.
Imports are likely to pick up in the coming months as planting season starts, but for now there are yet concrete signs of recovery in fuel demand.
Government ministers said on Tuesday that it was too early to conclude industrial sector has entered a recovery stage despite positive signs, in a worst global economic slump in 70 years.
But overall slowing industries triggered by a sharp fall in exports has led analysts to slash China's oil demand forecast.
The International Energy Agency (IEA) has predicted China's oil demand will grow at the slowest pace in nearly a decade this year, after an estimated 4 percent increase in 2008, and said there was room for a further downgrade. Some analysts have already predicted a contraction for 2009.
Source: Reuters
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