China's Oil Demand Defies Expectations: A Surge in Refinery Activity Amid Maintenance Season
Here’s a surprising twist in the global energy narrative: despite it being the season for routine maintenance, China’s refineries have ramped up their operations significantly. But here’s where it gets even more intriguing—this surge comes at a time when many expected a slowdown. According to official data cited by Reuters, Chinese refiners processed a staggering 39% more crude oil last month, reaching a total of 60.83 million tons, or approximately 14.86 million barrels per day. This uptick challenges the notion that the world’s largest oil importer is facing an irreversible decline in demand.
While the November daily average was slightly lower than October’s 14.94 million barrels, this dip is largely attributed to maintenance activities that took 1.2 million barrels of daily capacity offline, as explained by Kpler’s senior oil analyst, Muyu Xu. However, the story doesn’t end there. Independent refiners, often referred to as ‘teapots,’ have been working overtime, thanks to newly issued crude import quotas. This has not only offset the maintenance-related slowdown but also set the stage for robust throughput rates in December.
And this is the part most people miss: China’s oil production has also seen a notable increase, rising by 1.7% year-on-year to 198.25 million tons. In November alone, the country produced 17.63 million tons of crude oil, a 2.2% increase compared to the same month last year. This dual surge in both refining and production raises a bold question: Is China’s oil demand narrative being rewritten?
From January to November, Chinese refiners processed 4% more crude oil than in the same period last year, totaling 675.07 million tons. This growth, coupled with a rise in domestic production, casts doubt on the widely held belief that China’s oil demand is in irreversible decline. Average oil production this year has climbed to 4.3 million barrels per day, up from 3.8 million barrels per day in 2020. Yet, China remains heavily reliant on imports, which account for 70-75% of its consumption.
This reliance on imports may explain China’s aggressive stockpiling of crude oil while prices remain low. The country has been adding to its reserves at a rate of around 1 million barrels per day this year. Additionally, China is expanding its storage capacity, with 11 new storage sites set to be built across the country in 2023 and 2024, adding a combined capacity of approximately 169 million barrels.
Controversial Interpretation Alert: Could China’s stockpiling efforts be a strategic move to secure energy security, or is it a sign of deeper economic uncertainties? This question invites debate, as some argue that stockpiling reflects a pragmatic approach to low prices, while others see it as a hedge against potential supply disruptions. What’s your take? Share your thoughts in the comments below.
By Irina Slav for Oilprice.com
More Must-Reads From Oilprice.com:
- Exxon Joins Chevron in Eyeing Lukoil’s Global Fire Sale
- Sanctions Slow Russian and Iranian Crude Flows to China
- Russian Crude Piles Up but Oil Prices Refuse to Move
