China Oil Highlights

China oil highlights:

• China’s crude oil imports averaged 12.11 mn bpd in May according to General Administration of Customs figures out this week – 17.4% higher than April. Crude imports were just behind the 12.32 million bpd from march, which was the highest on a per day basis since June 2020.
• The import increase is being driven by refineries set to come back from Spring maintenance ahead of peak summer demand.
• The lag effect of imports reflects positive sentiment for Chinese demand a few months ago rather than current sentiment which may result in imports dipping – especially as stockpiles grow (see below).
• China continues to rely on cheap barrels from Russia, Iran and Venezuela.
• Fears around China’s recovery are weighing on oil markets this month, outweighing any cut news out of OPEC+ at the start of the week.
• China’s purchasing managers’ index (PMI) dropped in May to a five-month low of 48.8, pointing to a sharper-than-expected contraction in factory activity. Manufacturing activity was below estimates for a second consecutive month.
• An OilChem note places state run refinery runs at 78% as of June 8, Shandong at 62% and independent at 62%.
• The same note placed commercial diesel stockpiles at 15.8mn tons and gasoline at 13.2mn tons.
• China’s onshore crude stockpiles hit a two-year high in May of 966mn bbls before easing back to 963mn bbls in early June according to Kpler. Inventories were above the 5-year average of 858mn bbls.
• Onshore inventories are the highest since December 2020 according to Vortexa as a customs probe in Shandong has kept oil from clearing storage.