China imported significantly less crude oil in July, Commerzbank’s commodity strategist Carsten Fritsch notes.

Downside risks to the forecasts

“According to customs data, imports fell by almost 12% compared to the previous month to less than 10 million barrels per day. This is the lowest level for almost two years. The still high oil prices until mid-July and only subdued demand for fuel have pushed processing margins down to an unattractive level for Chinese refineries and thus reduced refinery activity.

“The need for imports was correspondingly lower. However, imports have tended towards weakness not only since July. In the first seven months of the year, they were 2.4% lower than in the same period of the previous year. Unless there is a noticeable increase in the remaining months of the year, there is a risk of an annual decline this year.”

“Chinese refineries are apparently also finding it difficult to export the oversupply of oil products. Exports of fuel fell to less than 5 million tons in July for the first time in three months and were 4% lower than in the previous year after seven months. As such, there are downside risks to the forecasts, which assume a significant increase in demand for oil in China and the rest of Asia in the second half of the year.”