A report from Reuters (below) headlining lower Chinese oil imports in July contains a much more interesting comment:  “We believe first-half crude stocks have risen much faster than a year ago, together with inventories of gasoline and diesel,” said Yan Kefeng, a senior Beijing-based analyst with Cambridge Energy Research Associates who closely tracks China’s rarely reported oil inventory data. “We are likely to see fuel imports slowing in the coming months.”

China July crude imports in

biggest fall since Jan 05

• Reuters
• , Monday August 11 2008

* July crude oil imports 3.25 mln bpd, down 7 pct vs year ago

* Steepest fall in crude imports in three and a half years

* Net imports of refined fuels in July up 20 pct vs June (Adds analyst comment on easing demand, stocks)

By Chen Aizhu

BEIJING, Aug 11 (Reuters) - China’s crude imports unexpectedly fell 7 percent in July to a seven-month low, its steepest monthly drop since January 2005 as refiners balked at soaring crude costs amid lagging domestic fuel prices.

The July decline follows a weak 3 percent rise in June imports at a time of mounting concern that the U.S. economic slow-down is taking a bigger than expected toll on other markets, potentially undercutting oil use in the world’s No. 2 consumer and weighing on world prices still partly buoyed by Asian demand.

Imports could rebound if the fall was due to refiners drawing down crude stocks, but some analysts warned it could be an early signal of lacklustre end-user demand that actually caused an unusually large build-up in inventories earlier in the year.

“We believe first-half crude stocks have risen much faster than a year ago, together with inventories of gasoline and diesel,” said Yan Kefeng, a senior Beijing-based analyst with Cambridge Energy Research Associates who closely tracks China’s rarely reported oil inventory data.

“We are likely to see fuel imports slowing in the coming months.”

China imported 13.79 million tonnes (3.25 million barrels per day) of crude oil in July, down 295,000 bpd from June, the General Administration of Customs said on its website (www.customs.gov.cn).

The scaleback in July purchase also dragged down the growth in the first seven months to 8.3 percent, with total imports in the period at 104.32 million tones (3.57 million bpd).

For a graphic of China’s crude oil imports, click on: https://customers.reuters.com/d/graphics/CN_CRDIMP0808.gif

Chinese refiners often try to run down stocks rather than import crude at high prices. During May and June, when refiners would have been booking cargoes for arrival in July, crude oil surged from nearly $110 a barrel to $140 a barrel before hitting a record high $147.27 a barrel on July 11.

The nearly 20 percent fall in prices since mid-July may have opened an opportunity for refiners to restock supplies in August, and the commissioning of several major new refineries — including offshore major CNOOC’s first refinery and a joint venture between Sinopec Corp with Exxon Mobil and Saudi Aramco — could help stoke a recovery in imports.

But some industry officials also pointed to weak demand.

“Products inventories are rising in many of our regional fuel marketing outlets. Demand may be slower than we earlier thought,” said a Sinopec Corp trader.

HIGH INVENTORY

China’s 17-18 percent rise in domestic gasoline and diesel prices in late June, its first increase in eight months, failed to eliminate losses for state-run refiners to Sinopec Corp <0386.HK> and PetroChina <0857.HK>, which have trimmed domestic refinery production in favour of importing fuel with a tax break.

Rather than match the surge in global oil prices with sharply even higher petrol and diesel prices, Beijing is handing out subsidies in the form of tax rebates. Top refiner Sinopec received a total of about $4.4 billion of government handouts to compensate its first-half losses, sources have said.

And under pressure to ensure smooth fuel supplies during the Olympics this week and next, the two importers have stocked up on fuel supplies, raising inventories to record highs by end of June, according to Xinhua-run industry newsletter China OGP.

The rising inventories, which China rarely reports, suggested that the country’s fuel demand has grown at slower pace than the 5.3 percent increase in the first-half’s implied consumption as calculated by Reuters. [ID:nBJI000069]

Net imports of oil products such as gasoline, diesel and fuel oil, but excluding liquefied petroleum gas, increased by nearly 20 percent in July from June.

(For a table of China’s July net fuel imports [ID:nPEK50509])

The cut in July crude imports coincides with slowing car sales in China, the world’s second-largest vehicle market, which rose at less than 7 percent from a year earlier in its slowest growth in two years. [ID:nSHA373825)]

(Reporting by Jim Bai, Chen Aizhu and Beijing newsroom; Editing by Jonathan Leff)

Tags: peak oil energy investments

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