China Breaks Oil Import Records in Landmark Year

Watching China for a sense of where oil prices are heading has become standard practice among analysts in the past decade—and with a good reason.The Asian powerhouse has become a weathervane for global oil demand as it has become the top importer and second-largest consumer of the most traded commodity in the world. And despite nagging doubts, last year was another when China did not disappoint.

Earlier this month, customs authorities reported that oil imports had broken the previous record, reaching 11.28 million bpd last year. This was an 11% improvement on 2022 prompted by healthy fuel demand at home and abroad.Yet imports were not the only ones on the rise. Domestic production of crude oil also hit a record in China last year. The annual total stood at 208 million tons, up by 3 million tons from the previous year. The average daily came in at 4.2 million barrels.

While all this was happening, China was also filling up its oil storage tanks. During the first 11 months of the year, the flow of oil into storage averaged an estimated 670,000 barrels daily, Reuters’ Clyde Russell reported.Russell argued that this pace of storage filling suggested China’s energy consumption was not as robust as it may look, which is a bearish sign for oil traders. The argument also included a mention of the record oil imports that, while indeed at an all-time high, fell short of the import rate forecast by the International Energy Agency.

Given the IEA’s track record with oil demand forecasts lately, it looks quite likely that it overestimated China’s demand for crude—as did all the analysts and institutional traders who expected the Asian economy to grow in leaps and bounds with no fluctuations whatsoever last year.This, however, was not the case, prompting a worry about Chinese oil demand that became chronic in the course of the year and acted as a lid on benchmark prices for much of it. Yet the above data shows that demand for oil from China was indeed robust—even if it was not all domestic demand, as Reuters’ Russell noted in his report.

According to him, fuel exports from China booked yet another record-breaking figure last year, gaining 16.7%, or 190,000 bpd, to reach 1.37 million barrels daily. Per Russell, this suggested lukewarm demand at home. From another perspective, it might just as well suggest healthy demand for fuels outside of China, too. This demand was especially notable in Europe after Brussels imposed an embargo on Russian crude and fuels and urgently needed to find alternatives.

This may be about to change this year. The first batch of fuel export quotas issued by Beijing for this year were unchanged from a year ago. To bears, this would suggest expectations of weaker global demand. To bulls, that would be a wait-and-see moment, especially as energy analysts once again predict China will lead the world’s oil demand growth, regardless of hiccups in its economic growth trajectory.Per Wood Mackenzie, for instance, China could see 540,000 bpd in oil demand growth this year, driving the global total to 2 million barrels daily. Most of the demand growth was expected in the second half of the year when economic growth was expected to gather pace, per Wood Mac analysts.

Meanwhile, however, demand for oil in China has slid down, and it has slid down substantially, shedding close to 600,000 bpd between October and November, per Energy Intelligence. The outlet attributed the decline to the tapering of the post-pandemic rebound in travel and, of course, weaker economic growth. This will, however, probably change in the coming days as the Lunar New Year holiday travel begins.Expectations about oil demand in China last year were loaded with optimism. Perhaps this year would see some more measured forecasts that are more in line with how economies actually grow rather than with how analysts want them to grow.