A total of 27.92 million barrels per day (bpd) arrived in Asia in July, according to data compiled by Refinitiv Oil Research, eclipsing May’s previous record high of 27.35 million bpd and higher than June’s 27.53 million bpd.
Much of the strength in Asia’s imports can be put down to China, with Refinitiv estimating the world’s biggest crude buyer saw arrivals of 12.04 million bpd in July, the third consecutive month that imports have been above 12 million bpd.
Russia remained the top supplier to China, with pipeline and seaborne arrivals of 2.04 million bpd in July, which was down from June’s 2.56 million bpd.
However, it was still enough to exceed imports from Saudi Arabia, which Refinitiv estimated at 1.82 million bpd in July, down from 1.94 million bpd in June.
The lower imports from both Russia and Saudi Arabia are likely a reflection of the additional output cuts announced by the two leading producers in the OPEC+ group of exporting countries.
China has increased the volumes it buys from other producers, most notably Angola, with July arrivals from the southern African nation coming in at 900,000 bpd, up from 450,000 bpd in June and almost double the 515,000 bpd average for the first half of 2023.
China also boosted imports from Oman, a Middle East producer outside of OPEC but part of the wider OPEC+ group, with arrivals of 910,000 bpd in July, up from 760,000 bpd in June.
This makes Oman the fourth-biggest supplier to China in July, behind Russia, Saudi Arabia and Iraq.
It’s also worth noting that much of the strength in China’s crude imports is because of massive inflows into commercial or strategic storages.
China likely stored 2.1 million bpd in June and 950,000 bpd over the first six months, according to calculations based on official data.
China doesn’t 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 crude processed from the total of crude available from imports and domestic output.
The question for the market is whether crude prices have now risen high enough to lead Chinese refiners to trim imports and use up some of their ample stockpiles.
Global benchmark Brent crude futures reached as high as $85.99 a barrel during Wednesday’s trade, the highest since mid-April as the market weighed the impact of lower output by OPEC+ against signs of resilient demand in Asia.
Outside of China, Asia’s other major buyers also boosted arrivals in July, with India’s imports estimated at a five-month high of 4.94 million bpd, according to Refinitiv.
India’s refiners continue to gorge on discounted Russian crude, with arrivals in July estimated at an all-time high of 2.08 million bpd.
However, lower Russian output coupled with moves by Moscow to lift export prices may temper India’s appetite for Russian crude in coming months.
Japan’s July oil imports are estimated at 2.49 million bpd, up from June’s 2.11 million bpd, while South Korea’s are put at 2.76 million bpd, up from 2.53 million bpd in June.
Another factor to consider is that the crude that arrived in Asia in July was most likely arranged in a window between March and May, a time when crude prices were declining, with Brent slipping to a low of $71.28 a barrel on May 4.
The recovery in prices since then will lift the cost of imports in coming months, which may temper some of the appetite among Asian buyers, especially India, which is often viewed as being more sensitive to prices than the developed economies of North Asia.
