US crude exports to China rebound from four-year low but outlook glum, Kpler says

Houston: US exports of crude oil to China, the world's top oil importer, have rebounded in October from their lowest levels since 2020 amid weak Chinese fuel demand and refinery profits, but the outlook for growth in exports is glum, according to ship tracking service Kpler on Monday.

China's = monthly imports of crude from the world's top producer hit 24,000 barrels per day (bpd) in August, the lowest levels since February 2020 when Covid-19 slashed demand. They have rebounded to about 134,000 and 130,000 bpd in September and October, respectively, Kpler data showed.

That, however, is still about half the average of 259,000 bpd in 2023, and weak Chinese demand has helped to reduce US exports to Asia to a three-year low in October of 955,000 bpd.

"The economic weakness that we're seeing in China is playing through to refinery run weakness and ultimately weak demand for refined products," Kpler analyst Matt Smith said.

China's overall crude oil imports fell 9 per cent in October, data showed on Thursday, the sixth consecutive month of year-over-year declines as the closure of a state oil refinery added to weaker demand from independent refiners.

Total imports fell to about 10.53 million bpd, data from the General Administration of Customs showed, recovering a bit from the July's 9.97 million bpd, the lowest level in 22 months.

Sanctioned countries

China increasingly has purchased its crude from U.S.-sanctioned countries such as Russia, Iran and Venezuela for cut-rate prices. The three combined accounted for about 3 million bpd, or about 30% of total October imports, Smith estimated.

China was the main destination of Venezuela's oil exports in October with 385,300 bpd shipped directly and indirectly, according to shipping data and documents from state oil firm PDVSA.

The expansion of the Tran Mountain pipeline (TMX) in May to nearly triple the crude flow from landlocked Alberta to Canada's Pacific coast also has boosted the number of shipments of Canadian crude heading directly to China, slashing exports from US ports.

Crude exports from Vancouver to China touched a record 217,000 bpd in October, Kpler data showed.

Re-exports of Canadian oil from US ports accounted for between 25% and 35% of UScrude exports annually to China in the last five years, according to Kpler.

Glum outlook

The weakness in US exports to China will likely continue, analysts said, as Beijing's efforts to stimulate economic growth will take time to take root and boost fuel demand.

"We shouldn't expect to see 6,00,000 to 7,00,000 bpd of demand growth from China going forward here, as we saw last decade," said Kpler's Smith.

More than half of China's auto sales last month were electric and plug-in hybrids, and sales of liquefied natural gas-fueled heavy trucks are rising, reducing demand for gasoline and diesel in transportation.

Chinese refiners' preference for sanctioned oil and barrels from the east of the Suez Canal also will remain a key factor, said Rohit Rathod, an analyst with ship tracking firm Vortexa.

Offsetting the glum outlook is an increase in government-approved import quota. China's 2025 quota for non-state-owned firms is up 5.8%, to 257 million metric tons, or 5.14 million bpd, the commerce ministry said last month.

The increase reflects in part the September startup of one of two new 200,000 bpd units at China's newest refiner, Yulong Petrochemical, buoying hope for higher imports.