China's Oil Demand Remains Strong Despite Macro Concerns

Welcome to the China’s demand is still very strong edition of Oil Markets Daily!

There are a lot of macro headline concerns nowadays from global trade wars to strengthening USD and emerging market contagion risks. China is at the center stage of all of this with the Shanghai index as one of the worst-performing indices this year, so investor concerns are somewhat valid.

This macro risk has also rippled into the oil world with commentators noting a potential slowdown in China’s oil demand. But the latest data indicates otherwise.

Chinese apparent demand, mb/d

Source: NBS, Energy Aspects

According to the National Bureau of Statistics of China (NBS) and the chart created by Energy Aspects, China’s apparent demand is near the all-time high reached in February this year.

From our perspective, we are also seeing a sizable increase in Chinese crude imports month-to-date:

Source: HFI Research

A big part of the increase in crude imports this month stems from an increase from teapot refineries:

Source: HFI Research

A combination of refinery maintenance along with destocking inventories led to this inevitable increase in crude imports. From what we are seeing, Chinese crude imports are expected to remain high into year-end further supporting our observation that Chinese implied oil demand remains strong.

Government Stimulus

In addition to the increasing oil demand, China’s government is announcing more stimulus for the economy in the face of the trade war concerns.

These announcements were made following the four-year low we saw in the Shanghai index. In our view, we should start to see more and more stimulus being announced alongside monetary intervention such as open market operations:

A good gauge for the casual observer on the state of China’s economy should be its equity markets. We will need to see the A shares stabilize going into year-end, and if we do, we know the risks of a macro blow-up dwindles.


Despite softening economic data, China’s oil demand remains strong and crude imports are expected to remain elevated into year-end. With the government now announcing more fiscal and monetary interventions, we expect the concerns about a China hard landing to dissipate.

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