The crude market may be underestimating China’s oil demand.
Storage data gathered by satellite implies the amount of crude China is putting into storage is below what can be extrapolated from the nation’s customs and production data, Barclays Plc analysts wrote in an Oct. 23 note. That means it may be consuming more oil than official data indicate and that the global supply-demand balance is tighter than estimated.
“If satellite data are accurate and reflective of broader activity in the Chinese oil sector, this is bullish for oil fundamentals,” New York-based analysts Michael Cohen and Warren Russell wrote in the report. “It implies that China’s refinery runs and end-use consumption may be understated, and that global balances are tighter than consensus and our own forecasts.”
Data from Ursa Space Systems Inc. implies inventories in the world’s largest importer expanded by about 360,000 barrels a day from April through August, equating to a year-to-date stockpile build of 87 million barrels, according to the note. That’s about two-thirds lower than the 1 million barrel-a-day rise government data suggests for the period, the bank said.
China’s overseas crude purchases jumped to the second-highest on record last month, rising 13 percent to 9.04 million barrels a day, as new refining units starting up boosted demand. Imports from January to September gained 12.2 percent over the same period last year to about 318 million tons.
The global crude market’s deficit is expected to average about 300,000 barrels a day this year, before switching to a surplus next year of similar quantity, according to the Barclays. The bank estimates Chinese oil demand growth of 600,000 barrels a day this year and 500,000 a day next year.