From Irina Slav: China imported 12 percent less crude oil in December than in November, when crude imports had hit a record high, sparking immediate concern about demand from one of the world’s top consumers.
While some say the slump is due to Beijing’s aggressive stance on fighting pollution, others say it is merely a seasonal decline.
The record-high November oil shipments to China were stockpiled, and used by refiners during the last month of the year, suggesting that the latter explanation is likely, and that China’s stockpiles are quite hefty.
Despite the December lull, for full-2017, crude oil import figures reveal a 10.1-percent increase from 2016, at 8.43 million barrels daily. What’s more, the first batch of oil import quotas issued by the government last month also gave market players cause for optimism: at 121.32 million tons, these are high enough to suggest a rebound in oil imports this year as they were 75 percent higher than the first allocations for 2017.
China is now the world’s biggest oil importer, overtaking the United States for the first time ever and likely to soon become the biggest natural gas importer, too: shipments of the “bridge fuel” hit a record in December amid harsh winter weather and a continuing move away from coal.
Miners also have reason to be happy with China: copper and iron ore imports also reached record levels last year as some local production capacity was closed due to subpar efficiency and high levels of pollution, causing it to be replaced with imports.
China is the top global steelmaker, consuming about two-thirds of seaborne iron ore shipments, and on track to use growing amounts of the steel it produces at home, Bloomberg notes, which signals further economic growth and therefore more good news for oil and gas exporters.
Despite the huge investments being made in renewable energy, the Chinese economy will continue to need fossil fuels for the foreseeable future. Yet crude oil may step aside to make way for more gas in the coming years.
The United States Oil Fund LP ETF (USO) closed at $12.87 on Friday, up $0.17 (+1.34%). Year-to-date, USO has gained 7.16%, versus a 4.14% rise in the benchmark S&P 500 index during the same period.
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