Chinese oil imports shrank by over 1m barrels per day in April, or 1% of global demand, as the country’s zero-covid policy took its toll on economic activity.
Long haul imports are said to have suffered from China’s reduced demand leaving VLCCs as the most affected trade, according to Poten & Partners.
Over 320m people in 43 cities in China are still under full or partial lockdowns, according to recent estimates by Japanese investment bank Nomura.
“China is the second largest oil consuming country and the leading importer of seaborne crude oil and by far the biggest source of tanker demand,” said Poten.
Last year, China represented about 33% of global crude oil related tonne-mile demand, with South Korea and Japan the next highest at just 10% and 8% respectively.
Poten said that while the 2021 figures reflect to some degree the demand impact from Covid in the west, it “clearly shows the importance of China and of Asia in general for the oil tanker market”.
Imports from the Americas declined by 427,000 bpd and from West Africa by 263,000 bpd, while imports from the North Sea and the Mediterranean declined by a total of 258,000 bpd.
Medium-haul Middle East imports dropped by 165,000 bpd, while short-haul imports from Far East Russia increased by 74,000 bpd, the broker said.
“Over the last several weeks, oil prices have operated under a ‘tug-of-war’ between the upward pressure of increasing sanctions on Russian oil exports by Western economies and the downward pressure of the oil demand impact of Chinese Covid measures,” Poten said.
“China is normally a price-sensitive buyer; they increase their purchases when oil prices are down and they lower imports when prices are up, and their inventories allow them to delay imports.
“In addition to the impact of the lockdowns, rapidly rising prices may have discouraged Chinese oil imports as well,” the broker added.
Poten said for now, the Chinese government seems to insist on continuing its Zero-Covid approach, but expectations are that demand in China will recover relatively quickly, once the Covid restrictions are lifted.
“Tonne mile demand could benefit if Europe further limits or even bans Russian oil imports and China buys more discounted crude oil from Russia,” the broker said.
Poten added that this will most likely come from the Baltic and Black seas, as pipeline capacity limits how much Russia can move to their East Coast.
“Once demand recovers, Chinese imports and tanker demand will return, providing a boost to VLCC demand in particular,” the broker said.
Consultancy Energy Aspects recently told the Financial Times that it expects the Chinese Covid curbs to be short-lived with Chinese oil demand picking up again in May and returning to year-on-year growth from July.
