China's surplus crude oil surged in April as refinery runs dipped: Russell

Reuters

19-05-2025

LAUNCESTON, Australia, May 19 (Reuters) - The volume of surplus crude oil in China available for storage surged in April for a second straight month as imports stayed relatively high and refinery processing slipped.
China's surplus crude amounted to 1.89 million barrels per day (bpd) last month, the most since June 2023 and up from 1.74 million bpd in March, according to calculations based on official data.
The sharp increase in the volume of surplus crude in March and April follows robust purchases by China, the world's biggest crude importer, of cargoes of discounted oil from countries under Western sanctions, mostly Iran and Russia.
China does not disclose the volumes of crude flowing into or out of strategic and commercial stockpiles, but an estimate can be made by deducting the amount of oil processed from the total of crude available from imports and domestic output.
Refiners processed 14.12 million bpd in April, according to official data released on Monday, down from 14.85 million bpd in March and also 1.4% lower than a year earlier.
Crude imports were 11.69 million bpd in April, down from the 19-month high of 12.11 million bpd in March.
Domestic production was 4.31 million bpd last month, down slightly from the 14-year high of 4.48 million bpd marked in March.
Putting imports and domestic output together gives a total of 16.01 million bpd of crude available to refiners, leaving a surplus of 1.89 million bpd once refinery throughput of 14.12 million bpd is subtracted.
For the first four months of the year, surplus crude available rose to 880,000 bpd, up from 580,000 bpd for the first quarter.
For the first two months of 2025, China's refiners actually processed about 30,000 bpd more than what was available from crude imports and domestic production, the first time in 18 months that they had drawn on inventories.
But the massive surpluses in March and April have reversed the earlier draw.
It is worth noting that not all of this surplus crude is likely to have been added to storage, with some being processed in plants not captured by the official data.
But even allowing for gaps in the official data, it is clear that in March and April China was importing crude at a far higher rate than it needs to meet its domestic fuel requirements.
The question for the market is what is the likely trajectory for China's crude imports and refinery processing in the coming months.
The large volume of surplus crude built up in the past months gives refiners more options.
China's refineries have a track record of buying surplus crude when they deem prices to be low, but trimming imports when they believe prices have risen too high or too quickly.
The rise in imports in March and April was largely a result of refiners buying Iranian and Russian crude, partly because they are discounted to other grades, but also partly due to concerns that U.S. measures to sanction vessels and buyers may prove effective.
China's seaborne imports from Russia were 1.38 million bpd in April and 1.22 million bpd in March, the strongest two months since 1.51 million bpd in October last year, according to data compiled by commodity analysts Kpler.
Imports from Iran were assessed by Kpler at 743,000 bpd in April, down from 1.39 million bpd in March, which was the highest month since October.
It's likely that Chinese refiners will seek to continue to buy Russian and Iranian crude, if they can work around the U.S. sanctions.
But if they are restricted in the volumes that they can buy from the two exporters, it also seems that they have enough crude in storage that they won't have to risk pushing prices higher by importing from other suppliers.
The views expressed here are those of the author, a columnist for Reuters.