China’s crude oil stockpiles likely grew at an elevated rate for the third consecutive month in May, which could allow Beijing to purchase lower volumes over the next weeks amid the spike in oil prices due to the Israel-Iran conflict.
China is estimated to have stockpiled a lot of crude in the early months of the year, Reuters columnist Clyde Russell has calculated. The high inventories could potentially allow Chinese refiners to reduce crude buying later this year, which would weigh on oil prices and perceived demand in China.
Since China doesn’t report oil inventories, Russell has calculated the rate of stockpiling or stock draws based on official Chinese data of imports, domestic production, and refinery processing rates.
These calculations showed that China likely stockpiled 1.4 million barrels per day (bpd) in May, as this is the available crude from imports and domestic production that wasn’t used by refineries last month.
The likely inventory build in May is the third consecutive month in which China has added more than 1 million bpd to its strategic and commercial crude stockpiles.
Amid heavy seasonal maintenance, crude oil processing at China’s refineries dipped by 1.8% in May from a year earlier, to the lowest level in nine months.
Chinese refiners processed a total of about 13.92 million bpd of crude oil last month, according to data from the National Bureau of Statistics. Throughput slumped to the lowest level since August last year as several major state-run and private refiners underwent scheduled maintenance ahead of the peak driving season.
China accelerated crude oil imports in March and April, but the increased purchases this spring weren’t necessarily a sign of recovering fuel demand in the world’s biggest crude importer. It’s more likely that Chinese refiners were aggressively stockpiling cheaper crude amid uncertainties about sanctioned barrels going forward.
This stockpiling could come in handy for China as it could allow it to reduce crude buying at prices with the war premium attached.
By Tsvetana Paraskova for Oilprice.com
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