After splurging a handsome amount for the Olympic extravaganza, China is set to take a respite in its oil imports, even though they are planning to release version 2.0 in manufacturing and exports. After piling up crude oil stocks since last November beyond logic, to avoid any untoward last minute disappointments during the Olympics, they are planning to stop importing oil temporarily.
The two Chinese state-owned refineries Sinopec and PetroChina had been importing increasing amounts of diesel since late last year and had recorded close to 100 thousand tonnes in June. The conclusion of the Olympics combined with huge oil stocks in reserves will reduce China’s short term demand on oil. The country’s oil imports are expected to dwindle in the coming months until the economic elements are factored in.
According to Wilfred Wang, chairman of Taiwan’s Formosa Petrochemical (FPCC), 25 per cent to a third of the Company’s diesel exports had gone to China for the past nine months. He further added, in the absence of non-economic factors which prevailed in the oil markets for the past one year, oil prices are bound to come down to a acceptable level.
Industry observers opined government intervention during this period on the refiners to avoid any last minute glitches before the Olympics had upped the ante on buying binge. The state-owned oil firms enjoyed tax rebates on refined products of importing during this period, had also stimulated the thirst. Consequently, the cumulative effect of stockpiling had taken a toll on these firms, forcing them to resell.
Analysts predict China’s lower demand clubbed with India’s oil exploration companies increased capacity to produce crude oil will bring down the prices at least in short term. They pointed out the dip in oil prices, saw a surge only during Russia-Georgia conflict in recent days.
The economic slow down in Europe and the US is expected to further reduce demand for oil, and increased production triggered by recent surge in oil prices across the globe are not positive indicators for oil markets at the moment. Total Chinese consumption of oil is about 8 million barrels a day and with the current stocks, it will take at least a couple of months for Sinopec and PetroChina to get even with their stocks.