27/11/2017 08:11 AST
The shifting dynamics of China’s crude oil imports show the scale of the challenges facing the Organization of the Petroleum Exporting Countries (OPEC) and its allies ahead of a decision on whether to continue with production cuts.
The detailed Chinese customs data for October illustrates trends that should give pause for thought to the leaders of OPEC and its allies, particularly major exporter Russia, ahead of the meeting in Vienna on Nov. 30.
Market share is the big issue for shippers to China, the world’s largest crude importer, and there are two strands to the problem.
The first is that the import data shows how China has been able to develop new relationships with oil exporters fairly rapidly, reducing reliance on some traditional suppliers from OPEC.
The second is that it appears that the burden of reducing exports, at least as far as China is concerned, isn’t being shared remotely equally by members of OPEC and their partners in output cuts.
This imbalance raises the chance that an extension to the overall output cuts first agreed a year ago will prove ineffective as some parties to the deal are tempted to export more in a bid to retain, or expand, market share.
U.S. EXPORT SURGE
China’s imports from the United States neatly encapsulate the dilemma that OPEC and its allies have in dealing with the challenge of rising U.S. exports on the back of the boom in shale oil.
China imported about 206,900 barrels per day (bpd) from the United States in October, the second-highest monthly amount on record since this trade flow started late last year.
Granted, that level of shipments doesn’t seem to present much of a threat to top suppliers Russia and Saudi Arabia, whose exports to China in October stood at 1.09 million bpd and 1.08 million bpd respectively.
But it represents a huge increase in less than a year, with China’s imports from the United States going from virtually zero in 2016 to a monthly average of some 135,000 bpd in the first 10 months of the year.
It also seems that U.S. exports are going to keep increasing in coming months, and quite strongly, according to vessel-tracking data compiled by Thomson Reuters Oil Research and Forecasts.
The shipping data show that China’s November U.S. imports should be around 242,000 bpd, based on six cargoes that have already been discharged at Chinese ports.
In December, they may rise to 379,000 bpd as the vessel-tracking data shows six cargoes already underway, all of them Very Large Crude Carriers with around 2 million barrels per ship.
FROM NON-ENTITY TO SERIOUS PLAYER
At a figure getting fairly close to 400,000 bpd, the United States would likely become China’s seventh largest supplier of crude, something that becomes much more than just a nuisance as far as the big guns of Saudi Arabia, Russia, Angola, Iran and Iraq are concerned.
The rise of non-traditional crude exporters to China such as the United States, Brazil and even Great Britain may also cause some of those countries trying to re-balance the market through output cuts to think more about preserving market share.
Producers such as Russia and Saudi Arabia ship to numerous countries, but the China data shows that as far as exports there are concerned, some OPEC countries and their partners appear to be doing more than others.
China imported 1.04 million bpd from Saudi Arabia in the first 10 months of the year, an increase of just 1 percent from the same period last year.
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Reuters
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