Recently, a picture of crowded supertankers
off the seashore of Singapore has been widely spread across the media. Many
analysts then concluded that China has been taking advantage of the
opportunities of international-low-price on oil to release the oil stock and
constantly hoard crude oil. While in the port of Qingdao, the crowded supertankers
have also attracted attentions from the media as early as this April.
an overlook scene of the supertankers on
the sea from Singapore
According to China Custom, China's daily
average import of crude oil amounted to 7.37 million barrels on April 2015,
while for the US, the daily import volume of the corresponding period was 7.2
million barrels. That's the first time for China to surpass the US in terms of
the daily import volume of crude oil. And since then, China's crude import has
constantly kept in a high level, take the year of 2015 as an example, the
annual import of crude oil of 2015 was near to 340 million tonnes, which is 1.5
times higher than that of 10 years ago. And it was exactly in the year of 2015,
China surpassed the US to be the biggest oil importer across the globe.
External Cause I: Declining Demand of
Former No.1 Importer
During the past five years, the crude oil
import of the US has decreased by 30%. On one hand, it was the slow economic
recovery and stagnant domestic consumption of the US to be blamed for the
declining demand on crude oil; on the other hand, which is of the most
importance, the output of the domestic crude oil in the US has continually
increased and frequently hit the record high with the development of the shale
revolution, which has further decreased the import crude oil as a percentage of
the domestic consumption and thus caused a continuous slide on the import
volume of crude oil in the US.
External Cause II: Fierce Competition
among Crude Oil Supply Market
The golden age for the oil market ranged
from 2004 to 2014, during which the international crude oil price had all the
way remained high with the price of more than USD100 for over three years, and
therefore the exporters of the crude oil has actually enjoyed the pleasure of
making money out of very little input.
The capital has always been a loyal
follower of making profit, and thus all kinds of investments flooded into the
oil and gas industry. The traditional oil producing countries of OPEC switched
their steps on oil and gas exploration to top gear; while the United States,
which has been regarded as an up-rising star in the industry, has rapidly given
birth to the shale revolution by making use of its advantages of finance and
technologies. At one time, the conventional oil productivity was in a steady
growth; meanwhile, the unconventional shale oil, oil sand, and the extra heavy
oil made their entry to the industry.
However, at the same time, due to the
sluggish global economic growth, the speed increase of the crude oil demand
went through the fall after rise, and gradually, the oil industry has been
under the pressure of "overcapacity'. With the plummet of the international oil
price on the August 2014, the whole industry was stuck in a dilemma, and the
business wars waged on market capturing turned to be fiercer and fiercer.
Currently, the OPEC determined the inferior
limit of the international oil price, while the producers of shale oil of the
US determined the superior limit. Saudi Arabia, the benchmark of the former,
took the lead to implement the strategy of "making some necessary concession to
secure the market share', and Iraq and Iran have also frequently hit the record
high in terms of their oil import; the latter managed to hold on its business
by the means of cost control so as to break through the darkness before dawn.
The once-proud-and-arrogant oil magnates showed a low-profile stance to their
major clients including China, and made great efforts to provide their
customers with various favorable terms, thus to try their best to capture the
prime market.
External Cause III: "Exchange Oil
for Loan'
In the age of high oil price, many members
of OPEC leaved crude oil as a pledge to raise large-scale financing. And
nowadays, with the value of the mortgage sharply depreciated, they have had to
repay the loan with oil products several times that of it used to be. While at
present, China turns to be the biggest winner as a creditor country with tens
of billion dollars of loans mortgaged on oil.
According to Reuters, for repaying a USD50
billion loan, 1 million barrels of daily oil export would be enough when the
oil price was USD120 per barrel; while when the price plummeted to USD40 per
barrel, the daily oil export then should be increased to 3 million barrels.
This statement may, from another point of view, help to explain why recently
supertankers crowded around Qingdao Port and China suddenly submerged by oil.
Internal Cause I: China to be a Major Oil Consumption Country
According to Economy and Technology
Research Institute of PetroChina, in the recent years, the oil consumption in
China's market has gradually increased; meanwhile, the domestic output of crude
oil has been stabilized at around 200 million tonnes, which consequently
increased the country's external dependence of oil consumption. For example, in
2015, the oil consumption of China was about 540 million tonnes, with the
proportion of external dependence of 60.6%. Calculated on the base of the
current situation, the total volume of oil consumption of China will amount to 600
million tonnes by the year of 2020; and by 2030, 80% of the oil consumption of
China would be provided by foreign producers.
Internal Cause I: Great Need from Teapot Refineries
Since the Chinese government canceled
import restrictions on the private refinery plants in 2015, the development of
newly built independent refineries, which have been called as "teapot
refineries' by the foreign media, is booming, meanwhile, those refineries have
gradually turned to be a main force in importing crude oil. According to China
Petroleum Purchase Federation, 27 private refineries have applied for import
quota by Feb. 2016, some of which have already received their quota. Generally
speaking, the total annual importing quota is 89.5 million, which means 1.8
million barrels per day. The refineries would buy bulk crude oil after getting
their purchase quota and thus stimulate the increase on the import demand.
Internal Cause III: China has quickened
its National Strategic Oil Reserves Plan
China launched the National Strategic Oil
Reserves Plan in 2003 and intended to complete the constructions of the base of
the strategic oil reserves by dividing the project into three phases in 15
years. According to the Medium and Long Term Plan for National Oil Reserves,
China will complete the construction of phase I and phase II of the oil
reserves project before 2020, by then it will form an oil reserve for 100 days
net import volume and attain to the "reference' level of strategic oil reserves
regulated by the International Energy Agency.
As the oil price went down since the middle
of 2014, some of the industry insiders suggested an increase on oil reserves
for China, and therefore to seize the opportunity to offset the shortfall
caused by the relatively late starting on the strategic oil reserves. According
to Reuters, China will increase the strategic oil reserves by 70 million to 90
million barrels in 2016, which as twice as that of last year in terms of the
purchase scale. However, the shortage of the warehouse, as one of the
obstacles, may act as a drag on its way to fulfill the plan of oil reserves.
*This article is edited and
translated by CCM. The original article comes from Jiemian.com.
About CCM:
CCM is the leading market
intelligence provider for China's agriculture, chemicals, food &
ingredients and life science markets. Founded in 2001, CCM offers a range of
data and content solutions, from price and trade data to industry newsletters
and customized market research reports. Our clients include Monsanto, DuPont,
Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.
For more information about
CCM, please visit www.cnchemicals.com or
get in touch with us directly by emailing econtact@cnchemicals.com or calling
+86-20-37616606.