China’s oil imports surge to record high

China’s crude oil imports averaged 9.61 million barrels a day last month, customs data cited by Reuters has revealed, with the agency noting the amount is the highest on record.

Once again, it was the independent refiners, or teapots, that drove the increase as they seek to fulfill their import quotas before they expire.

The total October volume of imports hit 40.80 million tons, of which teapots imported 8.22 million tons. Yet this was lower than the teapots’ intake as forecast by S&P Platts last month, which was nine million tons. It was, however, substantially higher than the 7.26 million tons independent Chinese refiners imported in September.

Last month, Beijing announced it will raise by 42 percent the oil import quota for its non-state refiners—most of which are the independent refiners—for 2019 as new refinery capacity is planned to enter into operation next year. This served to dampen worries about a possible decline in demand, but only temporarily: now OPEC and Russia are once again talking about cutting production because of expectations of excessive supply.

What’s more, China is changing its sources of crude. The country sharply reduced its intake of US crude, for example, as the trade war between Washington and Beijing escalated this summer. A few months ago, Chinese refiners stopped buying US oil completely in anticipation of tariffs on it. Beijing did not impose tariffs and in October, CNBC reported recently, refiners resumed purchases of US oil. However, the volume of these imports remains unclear and may be much lower than earlier imports, before the start of the trade war.

Chinese refiners have also been importing a lot of Canadian oil relative to their usual intake of this particular oil. With the discount of Western Canadian Select to West Texas Intermediate at historic lows making the Canadian blends particularly attractive for Chinese bargain hunters, chances are this trend will continue for the time being unless the price environment changes radically.

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