Observed flows to China from the two regions dropped to 5.04 MMbopd, the lowest since August, after reaching a 2018-high of 6.45 MMbpd in November, ship-tracking data compiled by Bloomberg show. Most of the barrels that left in December should arrive this month or in early February since deliveries take between 25 and 40 days.
Barely six weeks ago — as crude prices plunged — China seemed to be scooping up just about every oil cargo it could get. The December slump comes amid concerns about an economic slowdown in the country, the world’s largest oil importer. The Asian nation is in the midst of a trade war with the U.S., which could translate into lower growth in demand for crude.
Other factors are also at play. China’s overall crude imports and its implied crude surplus surged to a record in November, according to government data and Bloomberg calculations. That occurred as the country’s refiners sought to use up their remaining import quotas for 2018.
“The ease inflows to China coincides with the refiners expiring their year-end crude import quotas, as it takes about one month for the volumes to reflect in their tanks,” said Shiv Talsania, a refining analyst at Facts Global Energy in London.
Observed crude exports to China from the Persian Gulf, including non-OPEC member Oman, last month tumbled by 27% to 3.46 MMbpd. That’s the lowest since January of last year when those shipments were at roughly the same level. Flows from Saudi Arabia, China’s top supplier of crude oil in November, fell last month to 1.39 MMbpd from 1.6 MMbpd previously, according to Bloomberg tanker-tracking.
Exports to China from West African ports dropped by 7% in December to 1.58 MMbopd, a two-month low. However, shipments from the region remained well above the January-November average of 1.28 MMbpd.
Looking ahead, China is said to have issued 89.8 MMt worth of allocations in its first batch of crude import quotas for 2019. Separately, tanker rates to haul oil from the Middle East to China continue to plummet.
Suppliers in the Middle East and Africa face another challenge in sending oil to China. Starting this month, the Organization of Petroleum Exporting Countries and its allies have pledged to cut 1.2 MMbopd from the global market for at least the first half of the year.