Despite a slight recovery from May, Asia’s imports remain at multi-month lows in June amid constrained Middle Eastern flows and high prices for alternative supply.
Asia’s crude oil imports in the three months before the Iran war started on February 28 averaged as much as 26.79 million barrels per day (bpd), according to estimates by Reuters columnist Clyde Russell.
In contrast, the expected crude imports in June are at just 20.71 million bpd, per Kpler data cited by Russell. These would be higher than the imports of 20.39 million bpd in May, but still well below the average volumes from before the conflict.
China’s crude imports are tracked by Kpler at 5.8 million bpd in June, down from 6.8 million bpd in May, signaling that China wasn’t in any rush to purchase high-priced crude in April and May arriving in June.]
At the start of the Iran war, China held a very comfortable cushion of more than 1.2 billion barrels in commercial and strategic stocks, which helped the world’s top crude oil importer slash spot purchases and avoid panic-procurement at very high prices, unlike most of the other Asian importers.
Moreover, Asian refiners in mid-June reduced their spot purchases of Middle East crude for loading this month and next, following three weeks in which they had purchased millions of barrels of UAE, Saudi, and Iraqi crude.
Lingering uncertainties about the navigability of the Strait of Hormuz and high freight costs have deterred Asian buyers from continuing the buying spree that began earlier this month, with millions of barrels of Abu Dhabi crude snapped up in spot trades.
Asian refiners that had spent the better part of the past four months scrambling to procure crude from producers outside the Middle East have stocked up on crude for July and most of August. Buyers now have enough non-Middle Eastern crude lined up to arrive over the next two months, meaning that immediate spot purchases from the Middle East aren’t really a necessity.
The next major move in the market, assuming the Strait of Hormuz remains open and traffic gradually returns, will be shaped by the buying patterns of Asian refiners and China’s policy of crude procurement, namely if a $70 oil price – at about pre-war levels – would spur China to stock up on crude again regardless of its immediate consumption needs.
