China is hitting records for daily volumes of crude oil imports, just as the U.S.-Iran military confrontation threatens China’s security of energy supply.
The General Customs Administration announced that in November, China’s monthly oil imports hit a record 11.13 million barrels per day (BPD), up from 10.72 million BPD in October last year and 9.61 million BPD in November last year. China has passed the peak U.S. crude oil import level of 10.1 million BPD in 2005 at the current pace.
Until domestic output peaked at around 4.3 million BPD in 2015, China was the fourth-largest producer of crude oil. China has fallen to the seventh-largest manufacturer output as it has slipped to 3.8 million BPD, its lowest level since 2007.
After becoming the world’s largest importer of crude oil in 2017, China also paid about a $5 price premium for imported Middle Eastern oil, known as Brent crude; versus the cost of U.S. oil, known as West Texas Intermediate. Lower U.S. exports to China started to rise in 2016 but were curtailed in the trade war.
Following the targeted attack on Iranian Major General Qasem Soleimani and the decision of President Trump to impose sanctions on Iraq in the midst of rising tensions in the Middle East, crude oil futures reached $64.39 a barrel on January 6, with Brent rising $1.67 a barrel to $70.27 and West Texas Intermediate. But tomorrow’s oil futures prices dropped back to $68.15 on January 7 for Brent and $62.71 for West Texas Intermediate.
China’s 13th Five Year Plan released in 2017 is filled with self-sufficiency targets for oil and gas based on opening up new opportunities for private and foreign businesses. As part of the effort, China also announced in March 2019 a 20 per cent increase in its domestic oil exploration budget to $77 billion to try to increase production by 50 per cent in two of its older oilfields, or about 2 million BPD over the next five years.
Amid optimistic projections, China National Petroleum Corp. (CNPC) Chairman Wang Yilin pointed out that China’s import dependency ratio is “nearly 70 per cent.” He added: “As energy is a lifeline of the economy, CNPC as a key state-owned enterprise and the nation’s largest supplier of oil and gas must fulfil the political mission of enhancing national energy protection through sound resource developers.