In April, China overtook the US as the world’s largest importer of oil with imports higher than the US for the month. The US shale oil boom has decreased the need for oil imports in to the US and China has now taken the top spot. The IER has reported that US oil imports and Chinese oil imports are going to remain close with the countries swapping in and out of the number one place over the next several months. To stimulate economic growth, China recently cut interest rates for the third time in the last six months and once China consistently holds the top spot, it is anticipated that the country will become the top crude oil importer for the long term.
Chinese oil imports
The increased level of oil imports into China for April was partly due to higher shipments from Iran, according to IER. Iran is looking to gain more Chinese investment and may offer additional discounts on its oil to increase ties with China’s oil companies. China Oil also purchased a record number of Oman and Abu Dhabi crude cargoes in April. The majority of increased oil is believed to be purchased for China’s emergency stockpile.
Oil traders have reportedly said that China no longer passively accepts the prevailing market price and is now involved in how the market price is set for oil. IER has said that the amount of oil that China purchases from various oil producing countries affects its market price and is closely watched just as US oil stockpiles used to be a major factor in oil price determination.
The IER reported that US oil production rose by 3.3 million bpd over the past 10 years, mainly as a result of shale oil production due to the combined use of fracking and directional drilling. Increased production has in turn reduced US crude oil imports by approximately 3 million bpd. US net petroleum imports are now reportedly just 27% of consumption, down from 65% in 2010.
“The US is in an oil production bonanza, mainly due to shale oil production, but also as new offshore projects come on line. This production boom will continue to drop U.S. oil imports, making room for China to become the largest oil importer in the world, a ranking that it held in April 2015, and one which it will continue to hold in the long term as its economy continues to grow at 7%/y.”
Zhejiang Yaang Pipe Industry Co., Limited (www.yaang.com)