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Chinese refiners switched from drawing to building oil inventories again in October, at a rate of over half a million barrels daily.
That’s according to calculations made by Reuters’ Clyde Russell and based on official import and processing figures from Beijing.
Russell reported that Chinese refiners were adding crude to inventories at a rate of 560,000 barrels daily in October as production inched down while imports of crude ticked up.
This is in keeping with refiners’ behavior for most of the year. Per Russell, Chinese refiners added to inventories for seven of the ten complete months since the start of 2023 and drew from inventories during the remainder.
Normally, refiners draw on inventories when international oil prices start climbing. This year, they drew from inventories in the months of April, July, and September.
The net changes in inventories over the ten months since January amount to additions at an average daily rate of 680,000 barrels.
China’s imports last month averaged 11.53 million barrels daily, which was slightly higher than the average for September, at 11.13 million bpd. The same month the government issued a new batch of oil imports, raising the overall import quota for 2023 to a level 14% higher than the total for 2022.
However, domestic demand for oil has been weakening, at least according to analysts. The reason for the weakening was a combination of factors, including lower refining margins, higher levels of inventories in both fuels and oil, and a slower-than-expected pick-up in air travel.
These lower refining margins pushed down processing rates to 15.05 million bpd, Reuters’ Russell reported, which was down from 15.48 million bpd in September—a record high.
Meanwhile, as refiners in China run out of fuel export quotas, these exports are set for a potentially significant decline this month. According to one energy data provider, OilChem, the decline could be as steep as 40% for November.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com