Oil: China to Lower Production, Raise Imports

Published on January 19, 2016

*** With global crude oil prices at 12-year lows, Beijing has ordered China’s big three crude oil companies to reduce output in 2016. The goal is to cut total domestic output of crude oil in 2016 to levels that are actually below those of 2015. ***

*** While curtailing domestic output, China’s powerful NDRC (National Development and Reform Commission) has also set targets for 2016 that include a 5.5% increase in crude oil imports over actual 2015 import levels, to 370 million tons, for roughly an average of an additional 400,000 bpd of imports, much of which could be front-loaded and stock-piled with oil prices so low.  That would in fact represent an increase of about 10.5%, or roughly 700,000 bpd, over the 335 million tons officially reported in customs data for 2015 imports. The latest IEA estimates are for 350,000 bpd of demand growth this year in China. ***

*** And on the geopolitical front President Xi Jinping will be paying state visits to Saudi Arabia, Iran, and Egypt beginning today, January 19, through this Saturday, January 23, where he will reassure Riyadh and Tehran that China’s crude imports from the two feuding countries will be higher in 2016 than they were in 2015. ***

Xi Jinping will also attempt to present China as a mediating force in the dangerously strained relations between Saudi Arabia and Iran, inviting officials from both countries to Beijing for official or non-official talks, and will extend a formal invitation to Iran’s President Hassan Rouhani to attend the G-20 Summit China will be hosting in September in Huangzhou.

China’s 2016 Oil Targets

The NDRC submitted 2016 crude, refined oil import, export, and domestic output targets to the State Council in late December, which were reviewed by the Council and approved on Monday, January 11.

The target for crude oil imports has been set at 370 million tons. That is an increase from the 2015 actual import levels of 351.03 million tons and significantly higher than the 335.5 million tons reported in the customs data for 2015 (see below). Actual 2014 crude import levels were 323.89 million tons.

The domestic crude oil output target for 2016 will be 210 million tons. That is a slight decrease from 2015, when crude oil output was 214 million tons, and even a hair below actual 2014 production levels of 211 million tons.

The net refined oil export target has been set at 15-20 million tons. Actual refined oil net exports were 6.23 million tons in 2015, and net refined oil imports were 330,000 tons in 2014.

Reconciling Crude Oil Data for 2015 and December

There are often discrepancies between the import and export data available through customs figures and Beijing’s own numbers.

These are the actual numbers according to the NDRC:

China’s actual crude oil import number for 2015 was 351.03 million tons, 15.53 million tons higher than the 335.50 million tons provided by the General Administration of Customs (GAC), and 27.14 million tons more than the actual number of 323.89 million tons for 2014.

For December, the NDRC’s import figure was 34.62 million tons, 1.43 million tons higher than the 33.19 million tons from the GAC, which was 5.85 million tons more than the 27.34 million tons reported by the GAC in November, and 2.82 million tons more than the 30.37 million tons for the same period in 2014.

Total crude oil imports provided by the GAC for 2015 of 335.50 million tons were 27.13 million tons higher than the 308.37 million tons in 2014.

The NDRC data shows China’s crude oil exports amounting to 250,000 tons in December, the same as the GAC reported. China’s total crude oil exports were 3.014 million tons in 2015, 2.179 million tons more than the actual 835,000 tons in 2014.

On an interesting side note, according to the NDRC, China also exported 180,000 tons of crude oil to North Korea in December, compared with none in November, and above the 160,000 tons exported to North Korea for the same period of 2014.

China plans to export about 150,000 tons of crude oil to North Korea this month, despite Pyongyang’s nuclear test (see SGH 1/7/16, “North Korea: Beijing to Support “Limited” UN Sanctions”).

Reconciling Refined Oil Data for 2015 and December

According to the NDRC, actual refined oil imports in December totaled 2.57 million tons, 270,000 tons less than the 2.84 million tons reported by the GAC, and 350,000 tons less than the actual number of 2.92 million tons for the same period in 2014.

China last year actually imported 29.49 million tons of refined oil, 410,000 tons less than the 29.90 million tons reported by the GAC, and 1.98 million tons less than the actual of 31.47 million tons in 2014.

According to the NDRC, actual refined oil exports were 4.35 million tons in December. That was 30,000 tons more than the 4.32 million tons from the GAC, and 1.4 million tons more than actual number of 2.95 million tons at the same period in 2014.

China actually exported 37.47 million tons of refined oil in 2015, 1.32 million tons higher than the 36.15 million tons from the GAC, and 6.32 million tons more than the actual number of 31.15 million tons in 2014.

Finally, actual kerosene output was 36.42 million tons in 2015, 6.41 million tons higher than the 30.01 million tons in 2014.

Output as of January 10, 2016

Domestic output of crude oil was 5.6 million tons for the first ten days of January. The NDRC predicts crude oil output will be about 17.2 million tons this month.

Diesel output was 5 million tons in the first ten days of January. The NDRC predicts diesel output will be about 15 million tons this month. Actual diesel output was 179.48 million tons in 2015, 3.27 million tons more than the 176.21 million tons in 2014.

 Gasoline output was 3.4 million tons in the first ten days of January. The NDRC predicts that gasoline output will be more than 10.4 million tons this month. Actual gasoline output was 120.86 million tons in 2015, 11.78 million tons more than the 109.08 million tons in 2014.

 And finally, kerosene output was 1.05 million tons in the first ten days of January. The NDRC predicts kerosene output will be 3.2 million tons this month.

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