“SOMETHING ODD”
Deciphering the vast Chinese energy industry is difficult, even when the fog of war isn’t obscuring the picture further. Oil traders fill the gaps left by patchy official statistics by tracking tankers offloading and uploading in the country, measuring stocks using satellite imagery and by talking to their own on-the-ground contacts for clues.
Over recent weeks, industry executives have noticed something odd: Chinese state-owned oil companies have been reselling some of their oil cargoes to European and Asian rivals. The behaviour suggests surpluses – odd during a supply shortage.
The shift has not only capped benchmark oil prices but also helped to trigger a collapse in the premia that traders pay above them to secure physical crude. Barrels that in early April went for US$30 above benchmark prices are now changing hands at premiums as low as US$1. Talk of discounts has even started to emerge.
Tanker-tracking data gives the same anomalous surplus signal. Vortexa, a commodity intelligence firm, estimates that China is buying just 8.2 million barrels a day of crude from overseas, down from a prewar level of around 11.7 million. The 3.5-million barrels a day swing almost matches the total consumption of Japan and is double the amount supplied by the United Arab Emirates pipeline that circumvents Hormuz.
Simply put, it’s huge, perhaps the second – or third – largest factor rebalancing the oil market today, behind only Saudi Arabia’s own pipeline bypassing the strait and the use of the strategic petroleum reserves of the US and Japan.
