China’s February crude oil imports to sink due to virus

By Wang Sheng Source:Global Times Published: 2020/2/27 21:39:54

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China's imports of crude oil will decline by as much as 8 million tons in February due to tumbling domestic demand amid the outbreak of the coronavirus, a researcher at one of China's largest oil companies told the Global Times on Thursday.

However, China's vast demand for oil could return to normal levels in April or May that will boost crude oil prices, if the epidemic can be contained then, analysts said.

In February, China's crude oil imports could drop by 6-8 million tons, or between 15-20 percent, year-on-year, due to declining demand, Wang Lining, deputy director of the Oil Market Research Department at the Economics and Technology Research Institute of China National Petroleum Corp (CNPC), told the Global Times.

Due to the epidemic, which has seen much of China come to a near standstill, total domestic crude oil demand is expected to drop by 10.7 million tons, or 20 percent year-on-year, in February, according to Wang.

Such a decline in China's domestic crude oil demand has huge global implications as China is the largest oil importer in the world. In 2019, about 72.5 percent of China's total consumption was imported, up 1.6 percentage points from the year before, Dong Xiucheng, professor of the University of International Business and Economics, told the Global Times.

However, demand in China could return to normalcy in April or May, if the epidemic is effectively contained in March, as consumption of gasoline and diesel will rebound, according to Wang.

That could drive global crude oil prices up to $57- $64 per barrel for 2020, according to Liu Chaoquan, deputy president of the CNPC Economy & Technology Research Institute.

However, some losses could be hard to be offset. The profits of refineries will be squeezed because relatively high inventory levels push oil product prices down, Wang said.

Refinery utilization rates of CNPC and Sinopec are down about 15 percentage points compared with before the Chinese New Year, and rates for independent refineries in East China's Shandong Province have plunged about 28 percentage points, compared with before the Spring Festival, according to Wang.

Demand for oil products including gasoline, diesel and jet fuel, which account for about 18 percent of China's daily oil demand, is expected to fall by 2.4 million barrels per day in February, he said. Gasoline consumption could fall by as much as 50 percent in the month, he added.


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