Amidst the scenic sunsets over Heilongjiang’s Daqing oil field, the backdrop for China’s oil sector tells a different story, with the nation grappling with a notable downturn in its crude oil market. Throughout the first half of 2024, China, which stands as the world’s largest crude oil importer, witnessed a significant decline in oil imports. Compounding this issue, there has been an uptick in the volume of oil directed into both commercial and strategic reserves, with June alone seeing an addition of 1.48 million barrels per day (bpd).
As of mid-2024, approximately 900,000 bpd have been consistently added to storage tanks, an increase observed over recent months. This growing trend of stockpiling has been set against a backdrop of diminished refinery throughput, where the import of crude has not kept pace with the potential processing capacity. The discrepancy highlights underlying weaknesses in the sector, contrasting sharply with the still optimistic global demand forecasts by notable bodies such as OPEC and the International Energy Agency (IEA).
The lack of transparency in China’s strategic and commercial oil reserves complicates the analysis, but estimates indicate significant reserves. The total crude oil made available to refiners in June stood at 15.67 million bpd, sourced from 11.30 million bpd in imports and an additional 4.37 million bpd from domestic production. However, the actual processing by refineries was lower, totaling only 14.19 million bpd, a decrease of 3.7% compared to the same month the previous year.
This processing shortfall continued into the first half of the year, with refinery throughput reaching 14.44 million bpd against the available 15.34 million bpd. This represents a processing deficit of 900,000 bpd, slightly more than the 790,000 bpd shortfall recorded in the first five months of 2024. These figures suggest a sustained underutilization of refining capacity, indicative of a broader economic sluggishness within the sector.
In stark terms, the first half-year report of 2024 recorded a downturn in crude oil imports to 11.05 million bpd, marking a 2.9% decrease from the 11.38 million bpd noted over the same period in 2023. The cumulative evidence points to a weakening outlook for China’s oil sector, with no clear signs of demand acceleration. This scenario poses significant implications for global oil markets, potentially influencing future pricing and strategic stockpiling decisions internationally.