Chinese goes farther afield for bargain oil
The Globe and Mail reported that last month’s plunge in crude to USD 30 a barrel proved too tempting for China to turn down even as its economy lurches toward the weakest growth in a generation.
Physical shipping market collated data show that Chinese companies booked tankers to load 1.38 million barrels of crude daily from West Africa in February, the most since at least 2011. It also increased its purchases from producers in the North Sea and Russia. The voyages are all thousands of kilometres farther than the Middle East, which supplies most to the Asian country.
Mr Olivier Jakob, managing director of Petromatrix GmbH, said by phone that “This surge in Chinese demand for crude goes against recent macroeconomic news coming out of the country but is very much in line with their past behaviour in low flat-price environments. Whenever there has been a strong retracement in prices, China has loaded up their reserves.”
Oil has plunged this year amid signs that China’s economy is slowing. The country’s growth will slow to 6.5 per cent this year, the weakest since 1990, according to forecasts and government data compiled by Bloomberg. Monday’s PMI data showed a drop to a three-year low, with the official factory gauge signalling contraction for a record sixth month. Brent crude traded as low as USD 27.10 a barrel last month, the lowest since 2003. It has since recovered to trade at about USD 34 a barrel.
However, there are several reasons why the flow may not be as bullish for the oil market as it might first appear.
First, the cargoes were boosted by a trade deal in December between the Angolan government and Sinochem Group, which will load eight cargoes this month, the most since Bloomberg began compiling data. China will add storage capacity of 145 million barrels this year, according to the International Energy Agency, meaning imports don’t necessarily equate to demand.
Source : The Globe and Mail