China’s recent dip into its crude oil stockpiles marks a significant moment, as this occurred during the first two months of the year. For the first time in 18 months, the processing capacity of refineries surpassed the total amount of crude available from both imports and domestic reserves. Refineries processed approximately 30,000 barrels per day (bpd) more than the sum of available crude oil during this period.
The National Bureau of Statistics reported that refinery throughput averaged 14.74 million bpd in January and February, reflecting a 2.1% increase compared to the same months in the previous year. To smooth out seasonal variations due to the Lunar New Year holiday, China combines import data for January and February. The country saw crude oil arrivals of about 10.37 million bpd and domestic production reaching 4.34 million bpd, resulting in a combined total that fell short of processing levels.
The underlying cause for this rare occurrence can be traced to weaker crude imports, which decreased by 5% compared to early 2024. One factor for this decline may be a reduction in purchases from Russia, following new U.S. sanctions on vessels transporting Russian crude. Additionally, refiners did not actively seek out alternative oil sources, likely due to surging global crude prices.
In January, Brent crude futures hit a peak of $82.63 per barrel. Refiners have a tendency to reduce imports when they perceive prices to be excessively high. A similar situation occurred in September 2023 when crude prices surged to a ten-month high.
While prices have receded since then, potentially encouraging future purchases, any increase in imports may not be evident until April due to delivery delays. Despite the 2.1% rise in processing volumes, the figures remain shy of previous norms. China’s refinery operations witnessed their first decline in over two decades in 2024, emphasizing the gradual recovery during the early months of 2025, aided by heightened demand for gasoline related to the Lunar New Year celebrations and new refinery capacities.