Seaborne crude oil imports into China have experienced a notable decline this year, a trend that could potentially reverse in the coming months, according to recent industry reports.
In its latest weekly update, shipbroker Gibson highlighted a significant drop in China’s crude oil imports. “Last year, China saw a substantial rebound in crude oil imports, fueled by the post-pandemic economic recovery. This year, however, has presented a different picture,” Gibson reported. “China’s average crude oil imports have decreased in 2024, with figures from the first half of the year showing a reduction of 50,000 barrels per day compared to the same period in 2023.”
The report attributes the decline in imports to several factors, including extensive maintenance in the second quarter and lower refining margins across Asia. Data from China’s National Bureau of Statistics indicates a 3.7% year-on-year decrease in refining output for June. Additionally, Sinochem Group has reportedly shut down two refineries in Shandong Province, each with a capacity of 300,000 barrels per day, though the precise duration of the closures remains unclear.
Structurally, China’s demand for crude oil faces challenges stemming from reduced factory output and a persistent real estate downturn. The construction sector, grappling with 12 consecutive months of falling home sales, has seen decreased consumption of plastics and refined oil. The official Producer Price Index (PPI), a gauge of factory strength, has also recorded declines for 20 consecutive months. Another factor contributing to weak demand is the growing adoption of electric vehicles, with China now housing more than half of the world’s electric vehicles. The International Energy Agency (IEA) projects that 45% of cars sold in China this year will be electric.
Despite the current slowdown, China remains the world’s largest importer of crude oil, with imports expected to reach 10.6 million barrels per day in 2023. India follows as the second-largest importer with 4.6 million barrels per day. Although the robust growth of China’s crude oil imports, which averaged over 10% per year from 2013 to 2020, appears to be a thing of the past, future demand is still projected to rise, albeit at a slower pace. The IEA anticipates an increase in Chinese oil demand by 510,000 barrels per day in 2024, with a further rise of 370,000 barrels per day in 2025.
Gibson noted that refining activity is expected to rebound later this year and into 2025, potentially supporting higher crude imports. The IEA forecasts a 500,000 barrels per day increase in crude production in the second half of 2024, as maintenance concludes at existing facilities. Additionally, the anticipated start-up of the 430,000 barrels per day Yulong refinery in the fourth quarter of 2024 could further boost production. China is also reportedly stockpiling oil, with plans to add nearly 60 million barrels to emergency reserves by March 2025 to enhance supply security.
Looking further ahead, the long-term outlook for China’s oil demand remains uncertain. The country’s oil consumption is expected to plateau by the end of the decade due to the rising prominence of electric vehicles, which are likely to reduce reliance on traditional transport fuels. Despite a forecasted decrease in oil production by 500,000 barrels per day, import growth is expected to continue, though at a slower rate compared to previous years, as noted by shipbroker Nikos Roussanoglou.
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