China’s oil imports not driven by domestic demand

China crude Nov09.jpgA key driver for the rally in crude oil markets has been the increase in China’s demand. The assumption has been that this confirms economic growth is recovering strongly.

Crude oil imports have certainly been rising since Q1, and have recently averaged 500kbpd more than 2008. Refinery runs have also been higher.

However, new analysis by Petromatrix shows that much of this increase is flowing into oil product exports, not domestic demand. As the chart illustrates, China was importing large quantities of diesel/gasoline in the run-up to the Olympics. Now, as the new refining capacity starts up, it has become a major exporter of both diesel and gasoline.

Petromatrix conclude that China’s increased refining capacity has effectively therefore “shut down refining capacity in OECD Asia“, rather than feeding domestic demand. It also worries that as more refineries come online in both China and India, their output will also be exported and compete with existing “refining capacity in the Atlantic Basin“.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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