Greater ChinaTankers

Chinese oil imports to decline this year for first time this century: IEA

VLCCs, currently racking up losses of in excess of $20,000 per day, can look to China’s covid battered economy as the single largest source for today’s depressed earnings environment.

VLCCs rely heavily on Chinese crude imports, something that has been a constant support for decades. However, this year’s mass covid lockdowns across the world’s most populous nation have seen the International Energy Agency (IEA) predict this week that Chinese oil import demand will fall this year, the first such reversal this century.

The IEA released its latest global crude oil demand outlook in which China takes most of the headlines, both for its sluggish appetite this year as well as the potential for it to roar back next year.

The IEA is now predicting that world oil demand will reach 101.6m barrels per day in 2023, surpassing pre-pandemic levels, thanks largely to a resurgent China with growth accelerating from 1.8m barrels per day in 2022 to 2.2m barrels per day in 2023.

Shanghai will conduct mass covid testing drives every weekend until the end of July

China’s predicted resurgence next year will put pressure on producers to keep up pace with rising requirements.

“Global oil supply may struggle to keep pace with demand next year, as sanctions force Russia to shut in more wells and a number of producers bump up against capacity constraints,” the IEA stated, something analysts at Norwegian shipbroker Lorentzen & Co suggested today ought to be seen as a “thumbs-up” for the VLCC market next year, with China coming back in action requiring more crude from wherever possible amidst declining Russian output.

China’s oil refiners saw output last month fall by the steepest year-on-year drop in at least 10 years, as coronavirus lockdowns hit fuel demand.

According to Reuters, China added crude oil to storage tanks at the fastest rate in two years in May as the amount processed by its vast refining sector dropped by the most in a decade.

China’s zero covid policy has seen many cities endure long lockdowns this spring. Shanghai, China’s largest city with 26m inhabitants, suffered the most high profile lockdown, which lasted more than two months. The city is still not back to normal with many compounds forced to lock down. Authorities in the eastern Chinese megapolis announced plans yesterday to conduct mass covid testing drives every weekend until the end of July.

In early May, Japanese bank Nomura said about 31% of China’s GDP was affected by lockdowns. That estimate fell to 9% as of Monday as most industrial hubs get back to work.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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