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China's crude oil imports in June 2024 fell 11% year-on-year to 46.45 million metric tons, driven by independent refiners cutting production due to weak profit margins and sluggish fuel demand. First-half imports dropped 2.3% to 275 million tons. The decline in gasoline and diesel demand and the impact of refinery maintenance were key factors. However, a government mandate to increase state reserves by 60 million barrels by March 2025 may support future imports.

Highlights

Decline in June Imports: China's crude oil imports in June 2024 fell 11% compared to June 2023, reaching 46.45 million metric tons or 11.3 million barrels per day (bpd). This drop is attributed to independent refiners curbing production due to weak profit margins and tepid fuel demand.

First-Half Import Reduction: For the first half of 2024, China's crude oil imports totaled approximately 275 million tons, or 11.05 million bpd, marking a 2.3% decline compared to the same period in 2023. This is one of the steepest annual declines in recent years.

Impact of Higher Prices and Weak Demand: Higher crude oil prices and weaker-than-expected domestic consumption of gasoline and diesel have negatively impacted refining margins, contributing to the reduced import levels.

Decline in Gasoline and Diesel Demand: Between January and May 2024, gasoline demand in China fell nearly 2% year-on-year, while diesel demand dropped by 14%, according to Sublime China Information, a commodities consultancy.

Refinery Maintenance Impact: Large refineries like Hengli Petrochemical, Sinopec's Zhanjiang, and PetroChina's Dalian completed planned maintenance in late May and June, which supported purchases for the month.

Independent Refiners' Reduced Buying: Smaller independent refiners in Shandong, accounting for one-fifth of China's total imports, continued to curb buying due to prolonged thin margins, with some shifting to lower-priced fuel oil as feedstock.

Government Support for Future Imports: Crude oil imports might see a boost in the coming months due to a government mandate to increase state reserves by nearly 60 million barrels by March 2025, potentially supporting import volumes.

Conclusion

China's crude oil imports faced significant declines in June 2024 and the first half of the year due to higher prices and weak domestic fuel consumption. Independent refiners struggled with thin margins, further reducing import volumes. Despite these challenges, large refineries completed maintenance, providing some support for imports. Looking ahead, the government's mandate to boost state reserves could stabilize and potentially increase import levels in the coming months, mitigating some of the current downward trends.

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