Imports remained below the 10 million b/d mark in Q3. Some refiners have been drawing down their inventories, but that pace has slowed in recent weeks. Also, Q3 typically represents the peak of Chinese oil demand due to demand from the construction, agriculture, and fishing sectors, which are seasonally high. With rising oil prices, it’s not an encouraging environment for Chinese refiners to ramp up imports. There were discussions about the government mandating an additional 8 million tons of crude for storage to increase the
Strategic Petroleum Reserve, but it’s a soft mandate. I don’t see much incentive for refiners to buy more crude right now. VLCC freight rates from the Middle East to China have also been sluggish, signalling minimal growth for Chinese imports going forward.
Is there appetite for further economic stimulus from the Chinese government?
The government is committed to meeting its GDP growth target of around 5% this year, and about 4.5% to 4.7% next year. They are walking a fine line between achieving this target while ensuring high-quality growth, focusing on innovation, technology advancements, and elevating economic standards. At the same time, they’re mindful of carbon emissions. The government has mandated that total refining capacity stay below 20 million b/d by closing less efficient refineries, so that’s not doing much to support oil demand. This could
create opportunities for other export-oriented countries like South Korea and Taiwan, as reduced Chinese exports allow them to fill the gap. Beyond China, we expect countries like India to perform well due to seasonal demand from their festive periods. Southeast Asia, including the Philippines, Indonesia, and Vietnam, has also been doing well with GDP growth rates between 5% and 7%, so that is all supportive of oil prices in the region.