Record Crude Purchases by China Seen Buoying Price Recovery

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Oil bulls betting the global glut will shrink may be encouraged by record Chinese imports last month.

Shipments from overseas to the world’s second-biggest oil consumer increased to 30.29 million metric tons in April, according to preliminary data released by the Beijing-based General Administration of Customs on Friday. That’s equivalent to 7.4 million barrels a day, rising almost 17 percent from March and up 3.1 percent from the previous high in December.

Crude has rebounded about 40 percent since January on signs a slowdown in the U.S. shale boom will deplete a glut that pushed prices to the lowest in almost six years. Rising purchases by China, which is forecast to account for 11 percent of global oil use this year, will add to speculation that the oversupply will shrink. Saudi Arabia’s deputy oil minister has said the market is in “excellent” condition.

“The robust Chinese purchases are likely to have played their part in the steep rise in oil prices in April,” Commerzbank AG analysts including Eugen Weinberg wrote in a report Friday. “This probably exaggerates the underlying demand trend, as a considerable proportion of the imports is likely to have been channeled into building inventories.”

Benchmark Brent crude prices fell almost 50 percent last year as Saudi Arabia and other members of the Organization of Petroleum Exporting Countries chose to protect market share over cutting output to boost prices amid the highest U.S. output in more than three decades. Futures in London fell by 1.6% to $64.45 a barrel at 3:27 p.m. local time Friday.

Price Collapse

As oil collapsed, China stepped up purchases to fill its emergency supplies and is expected to make available more capacity to store emergency stockpiles later this year.

Demand for crude supplies from the Middle East and West Africa was lifted by Chinese purchases in April, according to Ehsan Ul-Haq, a senior analyst at KBC Energy Economics in London. “It could be because China is buying for strategic reserves,” he said by phone. “But when China stops, it’s not good for these producers.”

China National United Oil Co., the trading unit of China’s biggest energy company known as Chinaoil, bought a record 24 million barrels for June loading on a Singapore pricing platform, according to a Bloomberg survey of traders. The number of supertankers sailing to Chinese ports meanwhile climbed 20 percent in the week to May 1 to the highest since December before declining by 19 percent this week, ship-tracking data show.

The Asian nation’s overseas purchases were forecast to slow as companies that account for 12 percent of its processing capacity are scheduled to shut units during the second quarter, according to ICIS China, a Shanghai-based commodity researcher.

Refiners probably accelerated their purchases on signs global oil prices have bottomed out, said Guo Chaohui, an analyst at China International Capital Corp. “Also, refinery maintenance may have not impacted crude throughput to the extent we expected,” Guo said by phone from Beijing.

Crude imports may decline to about 23 million to 24 million tons a month from April to June, ICIS China predicted on March 30.

— With assistance by Jing Yang, and Sharon Cho

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