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A clearer China picture set to emerge

New technologies will allow the oil market to understand what is going on in China quicker and in greater depth than before

China’s crude and refined oil products data is an important bellwether for the state of global oil markets and the wider global economy, and this is unlikely to get any less true as we move into the 2020s.

But the growing availability of timely, more complete and trustworthy data on China’s oil trade flows will equip the 2020s’ market participants with the ability to make ever more informed decisions about global supply and demand.

China’s crude oil imports hit a record high in October, with strong momentum rolled over into November amid elevated refinery run-rates. Waterborne crude arrivals into China grew by around 10pc year-on-year in January-November, according to Vortexa data. If these levels are anything to go by, we could see new records set in 2020.

And more granular data about the world’s second largest oil consumer is taking market players beyond just headline trends or delayed official statistics. Market watchers in 2019 had a better-than-ever view of crude flows into specific terminals, and greater insight into the types of crude grades carried. The ability to monitor complex ship-to-ship transfers at sea also revealed to a global audience the routes some Iranian and Venezuelan crude cargoes took into China, amid USled sanctions on these Opec members.

Technological advances in tracking small-sized tankers at scale is helping to paint a much more complete picture of China’s aggregate refined oil products flows

On a similar geopolitical note, the latest state of the US-China trade war and related tariffs was reflected in a sharp annual drop, of 45pc, in China’s intake of crude loaded from the US in January-November. The proliferation of more detailed and real-time shipping data also helped participants react faster to the market volatility caused by the US announcement of sanctions on subsidiaries of China’s state-owned shipping giant Cosco in September.

The interplay between Opec+ collaborators but supply rivals Saudi Arabia and Russia, vying for greater market share in China, can also be tracked day-by-day. Intake of Russian seaborne crude rose from around 620,000bl/d in the first quarter of 2019 to some 900,000bl/d in October-November. Russia also forged new routes into China in 2019, as we witnessed the first movements of Urals crude loaded from Baltic ports and transported via the northern sea route (NSR). It would be no surprise to see more such flows along this route into the 2020s.

Still, Saudi Arabia remained the top country of origin among waterborne supply, with arrivals up by close to 50pc year-on-year in the first eleven months of 2019. The Kingdom’s foothold in China continues to expand amid increased crude sales contracts, including those with new refineries that came online this year. We will see Saudi Arabia firmly defend its share against other competition as we move into the 2020s, despite an agreement by Opec and non-Opec allies to deepen collective production restraints in the first quarter of the new decade.

Technological advances in tracking small-sized tankers at scale is additionally helping to paint a much more complete picture of China’s aggregate refined oil products flows.

In the fourth quarter of 2019 so far, China’s gasoline and diesel exports have soared on the back of seasonally high refinery runs, the start-up of two new mega-refineries and a slowdown in domestic demand growth. China’s gasoline exports hit a year-to-date high of over 1.7mn t in November, while diesel exports held firm at a five-month high of 1.3mn t.

On the dirty products side, we saw in 2019 the gradual build-up of IMO-compliant fuels held in offshore floating storage in the Singapore/Malaysia hub. By December, the fleet in this region had grown to over 30 tankers, holding around 5mn t of such fuels on board. The ability to monitor similar reference inventory levels, including by grade, can be applied to China over the years to come. This will quickly bring to light the progress of its ambitions to establish a regional low-sulphur fuels hub as we enter the 2020s’ new global sulphur cap regime. 

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