(Bloomberg) — The global oil market is facing soft spots in Chinese demand prospects this half-year, potentially creating additional headwinds for crude prices.
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Taken together, a slower-than-expected return of refineries due to seasonal maintenance, softer purchasing from some key suppliers in July and a possible drop in monthly import volumes suggest there is a lack of strength in the world’s largest crude oil importer, which destroys the power. elsewhere.
Global crude prices have risen more than 12% this year as the Organization of the Petroleum Exporting Countries and its allies have curbed supply to support the market, and traders bet U.S. monetary policy would ease. Against this background, key figures indicate that there will be tightness in the short term, and that US crude oil inventories have actually fallen. Still, conditions in China – which accounts for one barrel in six of global oil consumption – remain a concern.
Due to seasonal maintenance, state refineries are expected to increase their daily processing volumes by just 1.3% this month compared to June, according to data from Mysteel OilChem based on a survey of 58 refineries affiliated with PetroChina Co. and Sinopec and shared with customers. In the same period last year, the profit was approximately 3%.
China’s recovery has been disappointing this year, with progress held back by an ongoing real estate crisis and falling consumer confidence, blunting demand for diesel, a key transportation and industrial fuel. As revenues from manufacturing the product declined, processors have lowered their operating rates, while more planned maintenance will take place in the fourth quarter.
Although national crude oil imports from January to May kept pace with volumes in the same period in 2023, there are signs that a significant recovery may take longer. Contracted deliveries of Saudi Arabian crude fell by 4 million barrels month-on-month in July, while trading was slower than normal for Russia’s ESPO, traders participating in the market said.
The trend has been highlighted by observers including Citigroup Inc., which has a less optimistic view of the market’s prospects than competitors like Goldman Sachs Group Inc. and Standard Chartered Plc. Imports are estimated at 9.5 million barrels per day in July, down 1.1 million barrels per day on a monthly basis and 800,000 barrels per day on an annual basis, analysts including Eric Lee wrote in a note.
Chinese crude oil purchases “have never been stronger,” they said, citing cargo tracking data.
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