U.S. crude oil exports to China have shown signs of recovery in October, rebounding from their lowest levels since 2020. However, analysts from ship tracking service Kpler warn that the overall outlook for growth in these exports remains pessimistic due to weak Chinese fuel demand and refinery profits.
Recent Trends:
In August, U.S. crude exports to China plummeted to 24,000 barrels per day (bpd), the lowest since February 2020.
Exports increased to approximately 134,000 bpd in September and around 130,000 bpd in October, according to Kpler data.
Despite this rebound, current figures are still about half of the average 259,000 bpd seen in 2023.
Weak Demand: The decline in Chinese demand has contributed to a broader reduction in U.S. exports to Asia, which fell to a three-year low of 955,000 bpd in October. Kpler analyst Matt Smith noted that economic weakness in China is affecting refinery operations and, ultimately, demand for refined products.
China’s Import Data: China’s overall crude oil imports decreased by 9% in October, marking the sixth consecutive month of year-over-year declines. The total imports reached about 10.53 million bpd, slightly recovering from July’s low of 9.97 million bpd, the lowest in 22 months.
Shift in Sourcing: China has increasingly turned to U.S.-sanctioned countries like Russia, Iran, and Venezuela for crude at discounted prices. Together, these countries accounted for approximately 3 million bpd, or about 30% of total October imports. Notably, Venezuela was the primary destination for its oil exports, sending 385,300 bpd to China.
Impact of Canadian Crude: The expansion of the Tran Mountain pipeline (TMX) has facilitated a significant increase in Canadian crude exports to China, reaching a record 217,000 bpd in October. Re-exports of Canadian oil from U.S. ports have historically accounted for 25% to 35% of U.S. crude exports to China over the past five years.
Future Projections: Analysts predict that the weakness in U.S. crude exports to China will persist, as China’s economic stimulus efforts will take time to yield results. Kpler’s Smith stated that expectations for demand growth of 600,000 to 700,000 bpd from China, as seen in the last decade, are unrealistic.
Shifts in Transportation Fuel: A notable shift in China’s automotive market is emerging, with more than half of last month’s auto sales being electric or plug-in hybrids. Additionally, the rise in sales of liquefied natural gas-fueled heavy trucks is expected to further reduce gasoline and diesel demand.
Government Import Quota Increase: On a more positive note, China’s government has increased the import quota for non-state-owned firms by 5.8% to 257 million metric tons (5.14 million bpd) for 2025. This increase is partly due to the startup of new refining units at Yulong Petrochemical, raising hopes for higher imports in the future.