Why is the demand for Chinese crude oil at full inventory?

In January, China's crude oil demand fell by 20 %, that is, a decrease of 3 million barrels per day.This must not help but touch the nerves of the global market, because China is the largest oil importer.OPEC+member states are discussing the possibility of holding emergency meetings to discuss measures to further reduce output to stabilize prices.China's independent refinery cannot sell its own oil product reserves.

China has been second only to the United States in terms of oil consumption. Until not long ago, China still needs about 14 million barrels of oil every day.This is more consumption than France, Germany, Italy, Spain, Britain, and Japan.China's independent refinery has made important contributions to the growth of oil demand, and has been increasing production last year.

According to the Bloomberg industry research forecast: China's independent refinery production capacity will increase 1.52 million barrels a day from 2019 to 2021.The first phase of China and the United States reached before the New Year to the market to enter a dose of enhanced agents.After all, the trade war has seriously hindered China's economic growth, and once the prospect becomes clear, the forecast of the growth of oil demand has become optimistic.At the end of December last year, the price of Brent crude oil at the end of December rose 22.7 %.

But now oil prices have fallen.Private and state -owned refineries cannot sell oil product reserves that they produce.According to Bloomberg, Sinopec Group, the largest refining company in China, plans to reduce output by 13-15 % in February.

As the inventory is full, 18 independent refineries will reduce output or fully suspend operations.According to data from JLC Network Technology, the operating rate of Chinese oil refineries has decreased by 15 % in the past week.

The demand for crude oil should be temporarily reduced to the outbreak of coronary virus.Due to the implementation of isolation, residents of Wuhan City and several cities with a large number of infected people are allowed to flow nationwide.Last week, the Ministry of Transport of China revealed that the number of travels in China from January 10th to 30th decreased by 16.5 % compared with 2019.In addition, in many cities, especially Hubei Province, shops, cafes, and restaurants are closed, and production is temporarily suspended.In many cities including Beijing, the Spring Festival holiday of the company has been extended to February 10.These measures aimed at restricting virus spread will undoubtedly affect passenger transport and freight, and the demand for passenger and freight transportation is also declining.Business activities are reduced, so fuel consumption is reduced.

Professor Huang Xiaoyong, director of the International Energy Security Research Center of the Chinese Academy of Social Sciences, pointed out in an interview with a reporter from the Russian satellite news agency that there are more fundamental reasons.

Director Huang Xiaoyong said: This situation may still be related to the current economic situation in China. It can be seen that the impact of pneumonia's epidemic on the entire economy is very obvious, and all aspects of consideration, arrangements, and plans may be affected.In addition, China is currently undergoing the transformation and upgrading of the industrial structure to adjust the past large amount of fuel consumption and energy consumption.At the same time, the entire energy structure is also changing, and the consumption and usage of new energy and natural gas increased day by day, which may also affect the continued growth of crude oil demand.Based on the current situation of the Chinese economy, various factors have combined the formation of the current situation.I think that with the termination of the Chinese epidemic, the Chinese economy may be transferred to a better state in the second half of the year, and this situation may change at that time.

Expert Huang Xiaoyong pointed out that the growth potential of China's economy still exists.According to some predictions, the coronary virus epidemic may cause economic growth in the first quarter to slow, but future growth will be re-accelerated and returned to a level of 5.5-6 %.

However, although fuel consumption may be restored, in the long run, fuel consumption may still be reduced.The Chinese government is implementing a policy to transition to clean energy, and as of the end of 2018, the demand for natural gas has increased by one -third.According to the data from the General Administration of Customs, China purchased 124.75 billion cubic meters of natural gas in 2018.Russia is helping China to meet the growing demand for clean energy.In December 2019, the Siberian natural gas pipeline was officially launched. It is planned to supply up to 30 billion cubic meters of natural gas through this route.In addition, the National Energy Administration of China announced last year that by 2020, it will invest 2.5 trillion yuan in renewable energy. This money will be mainly used to develop wind energy and hydropower, solar energy, and construction nuclear power plants.