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China: Low crude oil imports might be skewed by lunar new year


China’s crude oil imports dropped to 5.4mmb/d in February, in preliminary numbers published by the National Bureau of Statistics. That is 9% down on January’s imports and 9% down YoY.

Following last month’s customs data release, which had China’s crude imports at a seven-month high and the third highest level of imports on record, we note that the level of imports might have been skewed by the lunar new year. The lunar new year, which the Chinese typically celebrate with a week-long holiday, was in February this calendar year, while in 2012 it fell in the last week of January. This timing difference might account for some, or even all, of the MoM and YoY growth in January, as well as the apparent decline in February. Crude oil imports averaged 5.6mmb/d in the first two months of the year, only 1% down YoY.

No crude oil production or refinery crude throughput data were released for January, presumably as China’s National Statistics Bureau has been pre-occupied with the once in a decade leadership change currently taking place. We have therefore assumed flat MoM domestic crude oil production since December, in our crude-side methodology estimate for China’s implied demand for oil in February. On our estimates, implied demand in February dropped to 9.9mmb/d, down 5% MoM and 4% YoY. Implied demand averaged 10.1mmb/d in the first two months of the year, we estimate, 1% greater than the same metric a year ago.

The National Development and Reform Commission, the state body responsible for economic planning in China, is reportedly studying the possibility of shortening the assessment period for oil product pricing, to reduce disparity with international prices. That follows reports of discontent with the current policy which lead to price increases when prices were seen to fall elsewhere, including in Taiwan. Under the current pricing policy, a change in gasoline and diesel prices might be enacted if the price for the basket of crudes reportedly has changed MoM by over 4%. A change in the pricing policy that aligns internal product prices with global prices would be beneficial to the likes of PetroChina and Sinopec, which have downstream exposure. 

Colin Smith, Marc Jacouris (CFA)
VTB Capital analyst

China, oil

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