Russell: OPEC and IEA are focused on China's oil demand but it is the crude imports that matter.
What is more important to the crude oil market? Which is more important: the growth forecasts by major agencies of Chinese oil demand or the actual weakness of imports?
The International Energy Agency (IEA), as well as the Organization of Petroleum Exporting Countries, (OPEC), both talk about the demand for oil when they forecast the future of the oil industry in China, the largest crude importer of the world.
It is a practice that has been around for a while and is not challenged by the market.
There is a disconnect in the fact that China's oil exports are actually declining.
In its most recent monthly market report, OPEC stated that China's demand for oil would be 16.68 million bpd by 2024. This is a 320,000 bpd increase from the 16.36 millions bpd exporter group reported it to be in 2023.
According to data from customs, China's imports of oil in 2024 were 11,04 million bpd, a decrease of 2.1% or 210,000 bpd compared to 2023.
Demand includes not only crude imports but also products imported, domestic production and any changes to inventories.
The gap between the bullish OPEC demand numbers and the weak imports cannot be closed by the other demand components.
China's imports were 1,05 million barrels per day (bpd) in 2024. This figure was calculated using the 48.23 millions metric tons of customs data and converting it at BP Plc's rate of eight barrels per ton.
Customs figures show that imports of products also fell by 1.0% from the previous year in 2024.
China's crude oil production in 2023 was 4,18 million bpd. This is up 1.4% or 60,000 bpd.
China does not disclose changes in its commercial or strategic oil inventory, but you can estimate the surplus crude by subtracting what refiners process from the total volume available of crude from both imports and domestic production.
China will add about 1.15 millions bpd of oil to its stockpiles by 2024. This is up from 760,000 in 2023.
The data available shows that China imported less in 2024. Domestic production increased modestly, and it is likely that crude inventories were added.
The more important conclusion, however, is that relying on forecasts of China's oil consumption is likely to misrepresent the reality.
Price Link
If OPEC gains of 320,000 bpd for China's oil consumption in 2024 are the correct metric, then Chinese demand will be bullish on crude prices.
Crude prices were down last year. Brent futures, the global benchmark, fell from $91.05 per barrel on April 15, to $68.68 in September 10, and then ended 2024 at $74.64.
The seaborne price is what drives the entire crude oil market. China, while not the only driver, does play a significant role. It accounts for one quarter of all global imports.
The IEA's China figures were more modest than OPEC's. Its March monthly report put the total oil product growth in China at 151,000 bpd by 2024. However, it forecast a gain in 2025 of 228,000 bpd.
OPEC's most recent report predicts that China's demand for oil will increase by 310,000 bpd by 2025. This is a more optimistic estimate than the IEA.
Customs data shows that crude imports are still weak. In the first two month of 2025, arrivals were 10.42 million barrels per day, down by 370,000 barrels or 3.4% from the 10.79million barrels per day recorded in the same period of 2024.
Lower crude prices, a rebound in the economy and lower crude prices could lead to a rise in China's crude imports over the remainder of 2025.
The IEA and OPEC have already forecasted that oil demand in China will grow, but the decline of imports is already in conflict with their predictions.
These are the views of the columnist, who is also an author. (Editing by Kate Mayberry).
(source: Reuters)
