A dramatic build-up in China’s strategic petroleum reserve and surging demand for imported crude oil are likely to transform the global energy markets this year, regardless of any production freeze agreed by OPEC and Russia this weekend.
Chinese credit stimulus and a 20pc rise in public spending has set off a fresh mini-cycle of growth that is already sucking in oil imports at a much faster pace than expected.
Barclays estimates that the country will import an average of 8m barrels per day (b/d) this year, a huge jump from 6.7m b/d last year. This is arguably enough to soak up a big chunk of the excess supply currently flooding global markets.
Standard Chartered said Chinese imports could reach 10m b/d by the end on 2018, implying a supply crunch and a fresh spike in oil prices as the market is turned on its head.
I’ve seen (briefly, so cannot be sure about it) that a lot of that is refineries taking advantage of changing margins. And they’re exporting the processed fuels. That’s not a change in end demand for oil, just a change in who is refining it.