Oil market’s reliance on China shows narrowing options
China may have given oil markets false hope. A rapidly rebounding economy in the Asian powerhouse had initially revived demand, but bloated inventories and stockpiling by domestic refineries have exposed the fragility of prices.
A look at Chinese ports tells the full story. Shandong – home to a host of independent refineries – is completely congested. The volume of crude stored on tankers idled in Chinese waters near the port city for over a week has quintupled from normal levels.
Chinese refineries, which had taken advantage of relatively cheap prices over the past quarter, are now struggling to find buyers for products, dampening the appetite for crude further. Oil imports have extended losses as expected – dropping 7.4 per cent to a four-month low of 11.23 million b/d in August from July, data from China’s General Administration of Customs, showed recently.
