Oil Imports to China Set to Slow in 2011 as Economy Cools: Energy Markets
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China’s appetite for oil, which helped drive crude to the highest level since October 2008, may ease next year as the government takes steps to tackle inflation and work on expanding refineries slows.
The nation, the world’s biggest oil consumer behind the U.S., may import 5.1 million barrels a day in 2011, up 6.3 percent from this year, according to the average of six analyst estimates in a Bloomberg survey. That compares with a 20 percent jump so far in 2010.
China’s inflation accelerated to the fastest pace in 28 months in November, fueling speculation the government will raise interest rates next year. Higher borrowing costs may reduce the country’s sway over global commodity markets, according to Goldman Sachs Group Inc. Chinese gross domestic product will grow 9.2 percent next year, compared with 10 percent in 2010, a Bloomberg survey of 17 economists showed.
“Chinese policy makers will continue to tighten monetary supply and manage inflation risks, and that may result in a slower rate of growth in oil imports,” said Victor Shum, a senior principal at energy consultant Purvin & Gertz Inc. in Singapore. “Even with more modest growth, China will still be market leading global oil demand.”
Oil surpassed $90 a barrel for the first time in more than two years on Dec. 7 amid evidence that China, India, Brazil and Russia will lead the global recovery, fanning demand for fuel. Crude for February delivery was down 1 cent at $89.36 a barrel at 9:37 a.m. on the New York Mercantile Exchange. Futures are up to 13 percent this year.
Monetary Policy
Consumer prices surged 5.1 percent in November compared with a year earlier, the statistics bureau in Beijing said on Dec. 11, increasing the likelihood the People’s Bank of China will boost borrowing costs. The central bank raised interest rates on Oct. 19 for the first time since 2007.
The Chinese authorities “‘are raising rates, they are battling inflation,” Jeffrey Currie, head of commodities research at Goldman Sachs, said at a conference in London on Nov. 24. “When we look into 2011, the story is not going to be China. It is going to be Europe and the U.S.”
China will still account for more than a third of world demand growth next year, according to the International Energy Agency. Consumption will increase by 500,000 barrels a day, the Paris-based group said in its monthly oil market report Dec. 10, compared with a global rate of 1.4 million barrels a day. North American demand will be unchanged while Europe’s will shrink by 100,000 barrels a day, it said.
Seaborne Imports
China, the world’s second-largest importer of crude by sea, boosted purchases 16 percent to 4.4 million barrels a day in the past year, according to Clarkson Research Services Ltd., a unit of London-based Clarkson Plc, the world’s biggest shipbroker. U.S.-bound shipments grew 2 percent while Japan’s imports rose by 1 percent. Cargoes to the European Union shrank by 2 percent.
Slowing imports may have most impact on Saudi Arabia and Angola, China’s biggest suppliers. Saudi Arabia shipped 36.7 million metric tons to China in the first 10 months of the year, about 19 percent of its foreign purchases, according to Chinese government data. Angola, the second-biggest source, sent 33.7 million tons. Iran sold 17.2 million tons.
Demand for oil in China may also be hurt as refiners including PetroChina Co. and China Petroleum & Chemical Corp. reduce processing rates and build fewer plants.
Processing Rates
Crude refining rates climbed to a record in November as a diesel shortage that left at least 2,000 gas stations without supplies prompted plants to maximize output and postpone maintenance operations. The shortfall has since eased, Zhang Dafu, the chairman of the Jinling refinery run by China Petroleum, said Dec. 9.
Processing rose 10 percent to 36.7 million tons last month, or 8.96 million barrels a day, according to China Mainland Marketing Research Co., which compiles data for the National Bureau of Statistics. That exceeded the record 8.76 million barrels a day reached the previous month.
About 9 million barrels of crude may be processed daily in China next year, bringing the utilization rate of available capacity down to 64 percent from 67 percent in 2010, data from UOB-Kay Hian Ltd. show.
Chinese refining capacity may expand by 400,000 barrels a day in 2011, according to the median estimate in a Bloomberg survey of five analysts. China National Petroleum Corp., PetroChina’s parent, said in February it expected growth of more than 630,000 barrels a day in 2010.
China Petrochemical Corp., the parent company of China Petroleum & Chemical Corp., or Sinopec, added 70.8 million tons of annual refining capacity from 2006 to 2010, or about 14 million tons a year on average, according to Oilchem.net, an industry portal. The company built 10.5 million tons of additional capacity in the second half of this year and will add 8.6 million tons in the whole of 2011, Oilchem.net said.
--Chua Baizhen in Beijing and Winnie Zhu in Shanghai. With assistance from Alaric Nightingale in London and Mark Shenk in New York. Editors: Alexander Kwiatkowski, Clyde Russell.
To contact the reporter on this story: Baizhen Chua in Beijing at bchua14@bloomberg.net
To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net
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