As major consumers China and India snatched up cargoes, crude oil imports into Asia showed strong growth in the new year, peaking in January for the first time in eight months.
LSEG Oil Research data shows that the world’s top-importing region had arrivals of 28.57 million barrels per day (bpd) in January, up from 27.03 million bpd in December.
The largest crude consumer in the world, China, imported 11.31 million barrels per day in January, which was considerably higher than the 10.24 million barrels from the same month in 2023 but marginally lower than the 11.48 million barrels per day in December.
Given the lower oil prices in effect when cargoes were scheduled and the release of the majority of China’s annual import quotas in one tranche at the beginning of 2024, instead of the customary practice of multiple instalments, it is likely that the country’s refiners were encouraged to maintain imports at healthy levels.
With 1.94 million barrels per day of pipeline and tanker imports from Russia in January, China surpassed Saudi Arabia as the world’s largest crude provider, with 1.68 million barrels per day.
It’s important to note, though, that Saudi Arabian arrivals increased from 1.38 million bpd in December, indicating that the largest exporter in the world is attempting to reclaim market share in China.
China is expected to increase its imports from Saudi Arabia in February as a result of the kingdom’s decision to lower its official selling prices (OSP) for its flagship Arab Light crude for cargo loading in February to levels not seen in 27 months.
Asia’s imports of Saudi oil increased to 5.63 million bpd in January from 5.46 million bpd in December, indicating that the increase is not limited to China.
Trade sources claim that India, which had rejected Saudi oil in favour of cheaper barrels from Russia, is looking for more shipments from Saudi Arabia in February.
The second-largest importer in Asia, India, is expected to set new records in January with 5.33 million bpd of arrivals, up from 4.65 million bpd in December, according to LSEG’s tracking data.
With 1.43 million bpd in January compared to 1.34 million in December, Russia continues to be India’s top supplier. Iraq comes in second with 1.34 million bpd, up from 1.10 million bpd in December.
Refiners in India are expected to continue demanding large volumes of crude oil in order to capitalise on the country’s solid domestic and export fuel markets, given the country’s robust economic performance and the growing profit margins for refined fuels in Asian markets.
The market wants to know if Asia’s robust crude import growth so far this year will continue.
It is probable that February will witness strong imports as well, mainly since shipments this month will have been bought during the low price of crude.
Following a decline to the 2023 high of $97.69 in late September, global benchmark Brent futures fell to a 5-1/2 month low of $72.29 a barrel on December 13.
This indicates that cargoes arriving in February were probably scheduled during a period of falling crude prices.
But Brent began to rise in the middle of December, and a decline in January due to worries about global demand was reversed in the last few weeks as concerns about disruptions to shipping across the Red Sea due to missile and drone assaults by Yemen’s Houthi party, which is aligned with Iran, increased.
Brent concluded the week at $81.71, down from its peak of $84.80 a barrel on January 29.
In order to maintain constant refinery processing, China may resort to stockpiling if higher prices restrict its import demand.
Although India is a price-sensitive consumer as well, it will probably take several months for higher oil costs to reduce local demand to the point where fewer imports are made.
Overall, Asia’s robust crude import performance in 2024 is probably going to continue through the remainder of the first quarter; however, what occurs after that will primarily rely on the direction of oil prices.
