China crude oil imports surge likely due to re-stocking, inventories

Is China's rise to be the world's top net oil importer as bullish as it sounds, or are there still reasons to be cautious?

As is often the case with China, there are contradictory indicators that serve to muddy both the current state of its oil markets and the likely future trends.

Crude oil imports rose to a record 6.25 million barrels per day (bpd) in September, up 27 per cent from a year earlier and besting the previous record of 6.15 million bpd set in July. This helped to make China the world's largest net oil importer, ahead of the United States, a situation that is likely to persist, according to the US Energy Information Administration.

But, at the same time, China's implied oil demand fell 1.8 per cent in September from a year earlier to 9.61 million bpd, its first year-on-year decline in 17 months.

Implied demand, calculated by adding refinery throughput to net fuel imports, has been on a softening trend for much of the year, hitting a one-year low in August of 9.38 million bpd. The usual suspect for reconciling strong crude imports with softer implied demand is changes in inventory levels - which aren't officially disclosed.

It's likely that the overall strength in the past three months in crude imports is due to re-stocking and the build-up of commercial inventories ahead of the commissioning of new refinery units. It's also likely that refinery maintenance has served to lower total throughput, making implied demand look weaker than actual demand.

But there are also some other figures that call into question just how strong demand is in China.