Strict Chinese crackdown threatens to disrupt engine of global oil demand

Beijing’s crackdown on import quota abuse, combined with the impact of rising crude prices, could reduce China’s oil import growth to its lowest level in twenty years this year.

Shipments to the world’s largest crude oil importer and second-largest processor could stagnate or increase by as much as 2% to just over 11 million barrels a day this year, according to Reuters.

Chinese customs data showed that compared to an average annual import growth rate of 9.7% since 2015, this would be the slowest growth since 2001.

This forecast coincides with OPEC + plans to increase oil production by 400,000 barrels per day between August and December.

universal motor

China has been the global engine of oil demand for the past decade, accounting for 44% of global oil import growth since 2015, when Beijing began granting import quotas to independent refineries.

While analysts expect global oil markets to remain in deficit this year despite the increase in OPEC + production, China’s inquiries into trade in crude import quotas, and declining prices. The resulting import allowances to independent refiners have already dampened the group’s demand. imports.

China’s crude imports fell in June to their lowest level since 2013, after Beijing imposed a tightening of import quotas as part of a campaign to boost the refining industry and reduce oil prices. emissions.

Traders and analysts said many smaller refineries had not received any shares in the second batch issued in June, while others have already used up all of their allocations, according to “Reuters”.

The remaining refineries are expected to hold all of their stakes for the fourth quarter, when fuel demand peaks.

withdraw from reserve

China pulled millions of barrels of oil from its strategic reserves this month, in an unprecedented move to try to suppress inflation caused by rising costs of everything from food to fuel.

The country will supply major refineries with around 3 million tonnes – or 22 million barrels – according to Bloomberg, citing people familiar with the matter.

The move is the latest in a series of measures taken by the world’s second-largest economy to curb the high costs of economic recovery after the pandemic.