China's crude oil exports will rise only slightly in the fourth quarter from the third quarter if oil prices remain high, potentially easing the upward pressure on benchmark crude prices, Goldman Sachs says.
China imported 8.93 million bpd of crude oil in August, up by 6.2% compared to July, and further recovering from the decade-low seen in June, official Chinese customs data showed earlier this month.
China slashed its total crude oil imports to a decade low in June, culminating three months of very low import levels amid high prices and constrained supply from the Middle East.
The return to buying from Chinese refiners, now that fuel export restrictions are dropped, is a concern on the market that feared a major rebound in China's imports would trigger another leg higher in oil prices.
If the current high prices, with Brent hovering around $100 per barrel, persist, it is unlikely that China would materially raise imports, according to a Goldman Sachs note carried by Bloomberg.
China's crude oil imports are expected to rise by only about 600,000 barrels per day (bpd) in the fourth quarter compared to the third quarter, Goldman said.
“As a result we continue to view a possible escalation of strikes on Mideast crude production and export infrastructure - not higher China imports - as the main upside risk to our crude price forecast,” the bank's analyst wrote.
Since the fuel export controls were eased, Chinese refiners, especially the state-held giants, have prioritized cost control in crude deliveries amid record-high freight rates, instead of simply boosting imports, Emma Li, Lead China Oil Market Analyst at Vortexa, said in an analysis last week.
“In a record-high freight environment, shorter crude voyages can materially reduce delivered feedstock costs while allowing refiners to respond more quickly to changes in market conditions,” Li said.
“This gives Chinese refiners a meaningful advantage in protecting refining margins, particularly when Asian product cracks remain elevated.”
