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China Accelerates Crude Stockpiling Amid Weak Refining Output

China accelerated the pace of stockpiling crude oil inventories in May amid lower refining throughput and weaker crude imports compared to last year, in further bearish signs about China’s apparent oil demand so far this year.

China has likely added 1.08 million barrels per day (bpd) of crude to its commercial or strategic inventories last month, up from 830,000 bpd going to stockpiles in April, according to estimates by Reuters columnist Clyde Russell based on official Chinese data.   

China does not report commercial or strategic inventories, so analysts are trying to estimate the volume of stockpiling by deducting the amount of processed crude from all available crude coming from imports and domestic crude production.

China had 15.33 million bpd of crude available to refiners in May, with imports of 11.06 million bpd and domestic oil production of 4.27 million bpd. Refiners processed 14.25 million bpd. So the remaining 1.08 million bpd likely went to storage, per Russell’s calculations. 

The acceleration of China’s stockpiling wouldn’t have been a concern for those watching demand trends in the world’s top crude importer if it weren’t for a slowdown in imports this year and a slump in refining output.

China’s Crude oil imports are estimated to have averaged about 11.0 million bpd for January to May, down by 1.2% year-over-year, according to Reuters’ Russell.

In May alone, refiners in China processed 14.25 million bpd of crude, down by 1.8% year-over-year, according to data in tons from the National Bureau of Statistics (NBS) converted into barrels by Reuters.

Part of the weak Chinese refinery runs in May and the previous month of April could be attributed to the seasonal maintenance at some large state and privately-held refineries. But others have reportedly opted to prolong maintenance amid weakening refining margins.

China’s apparent oil demand – found to be weak so far this year – has weighed on international crude oil prices as concerns about Chinese demand and the prospects of interest rate cuts have dominated the market sentiment in recent weeks.

By Tsvetana Paraskova for Oilprice.com

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