Daily Management Review

A Drop In Annual Crude Oil Imports In China In 2021, A First Time In 20 Years


A Drop In Annual Crude Oil Imports In China In 2021, A First Time In 20 Years
There was a 5.4 per cent drop in China's annual crude oil imports in 2021 which was the lowest for the country since 2001. This was potential because of Beijing tightening controls on the refining sector to reduce excess local fuel production and refiner stockpiles.
Beijing started imposing import quotas on independent refiners in 2015 and since then China has had the distinction of being the highest importer of oil and the demand engine of the world as it accounted for about 44 per cent of the global increase in oil imports.
Following the announcement of the report, benchmark Brent crude oil fell slightly to $84.40 per barrel.
The General Administration of Chinese Customs reported on Friday that shipments into the world's biggest crude importer fell to 512.98 million tonnes (equal to 10.26 million barrels per day) from 542.39 million tonnes in 2020.
Last year, there were reports that imports into the world's second-largest refinery were slowing down as Beijing investigated tax cheating and irregular quota trading among independent refineries, as well as cutting fuel export quotas to limit crude processing.
As independent refiners scrambled to use 2021 quotas, December oil arrivals totaled 46.14 million tonnes, up roughly 20 per cent from the previous month and the first monthly year-on-year gain since April, according to customs data. The influx in December, which amounted to around 10.87 million barrels per day, was the biggest daily total since March.
According to China customs data, the reduction in 2021 contrasts to an average yearly import growth rate of about 10 per cent since 2015.
Companies started to stock up hugely in 2020, even as the oil price was the lowest in decades and swift recovery in fuel demand following the Covid-19 pandemic's early effects. However, facing rising prices and a slower increase in fuel demand, refiners and merchants reduced down stocks in 2021.
"Rising crude prices, a 'backwardated' market structure, and the government's overall strategy to cool the hype in the commodities market worked together in driving down last year's crude oil imports," said Mia Geng, an analyst with consultancy FGE.
Firms are discouraged from storing oil in a backwardated market since immediate delivery costs are greater than those in future months.
In 2021, 70 million to 90 million barrels of crude oil were brought down from storage, according to Liu Yuntao, an analyst with Energy Aspects, including a rare public auction of strategic petroleum reserves in September. 
Between April and November, monthly imports fell for eight months in a row, as Beijing investigated the irregular trading of import quotas, which resulted in decreases in licenses for independent refiners.
Meanwhile, natural gas imports, including piped gas and liquefied natural gas (LNG), increased 19.9 per cent year over year in 2021 to a new high of 121.36 million tonnes, according to customs data.
Strong Chinese LNG imports, particularly during the first half of 2021, helped the country surpass Japan as the largest importer of the super-chilled fuel in the world, speeding up the growth from the previous year's 5.3 per cent growth.
China's annual refined petroleum exports fell 2.4 percent to 60.31 million tonnes in 2020, the first drop since at least 2015, according to Friday's figures, as the government tightened export regulations to discourage excessive local refinery production.
Shipments in December decreased 45 percent year over year to 3.23 million tonnes, the lowest monthly level since July 2020.