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This Week in Petroleum

Release Date: September 21, 2022 Next Release Date: September 28, 2022

China increases crude oil imports from Russia despite less refinery activity

The resurgence of COVID-19 cases since March 2022 and China’s policy of localized mobility restrictions have recently reduced refinery activity in China. China’s refineries have been processing less crude oil so far this year than last year, and China has also been importing less crude oil. Despite lower crude oil imports overall, China has increased its crude oil imports from Russia.

In the second quarter of 2022 (2Q22), China processed its least amount of crude oil since 1Q20, the quarter in which responses to the COVID-19 pandemic in China had their strongest effects on economic activity (Figure 1). Although COVID-19 outbreaks since 3Q21 in China have been affecting demand for petroleum products, the 2022 outbreaks and strict mobility restrictions in major cities, including Shanghai beginning in May, have further reduced demand. Despite lower demand for petroleum products, China’s crude oil production has been at record highs this year as a result of national oil companies expanding capital expenditures and production targets to build inventories and prioritize energy security.

Figure 1. China's crude oil production and net imports vs. crude oil processing

Although China’s combined crude oil production and net imports have exceeded crude oil processing, which suggests inventory builds, China has been importing less oil than in late 2020 and early 2021. Some of that decrease may be attributable to crude oil becoming more expensive and making it less economical to stockpile. Low demand for crude oil processing because of reduced domestic demand and lower export quotas for petroleum products, beginning around the second half of 2021, are also likely causes for the decrease. Because of these factors, China’s net imports of crude oil fell to 10.0 million barrels per day (b/d) in 2Q22, according to China’s General Administration of Customs.

China’s crude oil imports were particularly low in June and July. In June, China’s crude oil imports decreased to 8.8 million b/d, the least since July 2018 (Figure 2). Imports remained at 8.8 million b/d in July, down 2.0 million b/d from May of this year, and increased to 9.5 million b/d in August. China exports only small amounts of crude oil (about 20,000 b/d).

Figure 2. China's crude oil imports (January 2018–August 2022)

Despite China’s total crude oil imports decreasing in recent months, crude oil imports from Russia have increased. Russia is typically China’s second-largest source of crude oil imports, slightly behind Saudi Arabia, and imports from Russia have generally increased over time, both in volume and share of imports (Figure 3). China’s crude oil imports from Russia have increased from 8% of crude oil imports in 2011 (slightly less than 400,000 b/d) to about 16% of crude oil imports in 2021 (1.6 million b/d) and to as much as 21% in August 2022 (2.0 million b/d). The share of total imports from Russia was 20% in June and 19% in July.

Figure 3. China's crude oil imports from Russia (January 2011–August 2022)

The share of imports from Russia has likely risen because of lower imports into China and shifting trade patterns following Russia’s full-scale invasion of Ukraine. Western economic sanctions have reduced demand for Russian crude oil, and as a result, have left Russia to look for alternative export destinations. Meanwhile, Europe has also been looking for alternative sources of crude oil, driving up prices for Brent crude oil. Likely in response to these dynamics, China has shifted its imports away from more expensive Western sources while maintaining high imports from Russia.

From June–August (the three most recent months of data from China’s General Administration of Customs as of September 21), Russia was China’s largest source of crude oil imports, averaging 1.8 million b/d, compared with 1.6 million b/d from Saudi Arabia. Russia is one of just a few countries from which China imported more crude oil in June–August 2022 than in November 2021–January 2022 (the three months preceding Russia’s full-scale invasion of Ukraine). Among China’s largest 15 sources of crude oil imports, China only increased imports from Russia and Malaysia in June–August (Figure 4). Although imports from Malaysia increased by 55%, Malaysia still only made up about 8% of China’s total imports from June 2022–August 2022. Imports from Saudi Arabia, China’s largest crude oil import source, decreased by 9% in the June–August period compared with the three months prior to the invasion, and imports from Iraq, China’s third most common source of crude oil imports, decreased 27% in the same period. In contrast, imports from Russia increased 7%.

Figure 4. China's crude oil imports by country before and after Russia's full-scale invasion of Ukraine (November 2021–January 2022 vs. June 2022–August 2022)

During the June–August period, China also imported significantly less crude oil from its top sources in Europe and the United States. Imports from Norway decreased by 82% in this period, and imports from the United Kingdom decreased 100% (from 173,000 b/d to 0 b/d). The relatively high Brent crude oil price associated with Europe’s need to find crude oil imports for the region is likely deterring China from importing crude oil from North Sea producers. This need for other crude oil sources has also diverted crude oil exports from the United States to Europe, rather than to China. China’s imports from the United States decreased by 63% in the June–August period.

In our September Short-Term Energy Outlook (STEO), we forecast China’s petroleum consumption will increase in 2023 to record highs (Figure 5). China completed several projects to expand refining capacity this year, and it has other projects under development that will expand domestic refining capacity next year and support this increased consumption. To meet the expected increased consumption, China will likely continue to import crude oil imports from several sources and increase domestic production. We forecast Russia’s oil production to decrease in 2023 once the EU economic sanctions are in full effect. Our forecasts for both China’s petroleum consumption and Russia’s petroleum production are subject to considerable uncertainty. Factors that could affect our forecast include China’s responses to further COVID-19 outbreaks, changes in global petroleum trade as a result of sanctions against Russia’s crude oil, and other global economic and geopolitical developments.

Figure 5. STEO forecasts for China's petroleum consumption and Russia's petroleum production

For questions about This Week in Petroleum, contact the Petroleum and Liquid Fuels Markets Team at 202-586-5840.

Retail prices (dollars per gallon)

Conventional Regular Gasoline Prices Graph.
Retail Average Regular Gasoline Prices Graph.
  Retail prices Change from last
Gasoline 09/19/22 Week Year
U.S. 3.654 -0.036down 0.470up
East Coast 3.457 -0.070down-arrow 0.371up-arrow
Midwest 3.518 -0.053down-arrow 0.453up-arrow
Gulf Coast 3.157 0.031up-arrow 0.350up-arrow
Rocky Mountain 3.877 -0.012down-arrow 0.278up-arrow
West Coast 4.845 0.020up-arrow 0.916up-arrow
On-Highway Diesel Fuel Prices Graph.
Regional Average All-Types Diesel Fuel Prices Graph.
  Retail prices Change from last
Diesel 09/19/22 Week Year
U.S. 4.964 -0.069down-arrow 1.579up-arrow
East Coast 4.889 -0.060down-arrow 1.537up-arrow
Midwest 4.995 -0.090down-arrow 1.705up-arrow
Gulf Coast 4.690 -0.070down-arrow 1.571up-arrow
Rocky Mountain 4.932 -0.029down-arrow 1.303up-arrow
West Coast 5.612 -0.046down-arrow 1.586up-arrow

Futures prices (dollars per gallon*)

Crude Oil Futures Price Graph
RBOB Regular Gasoline Futures Price Graph
Heating Oil Futures Price Graph
  Futures prices Change from last
  09/16/22 Week Year
Crude oil 85.11 -1.68down 13.14up
Gasoline 2.416 -0.017down 0.245up
Heating oil 3.173 -0.406down 0.964up
*Note: Crude oil price in dollars per barrel.

Stocks (million barrels)

U.S. Crude Oil Stocks Graph
U.S. Distillate Stocks Graph
U.S. Gasoline Stocks Graph
U.S. Propane Stocks Graph
  Stocks Change from last
  09/16/22 Week Year
Crude oil 430.8 1.1up 16.8up
Gasoline 214.6 1.6up -7.0down
Distillate 117.3 1.2up -12.1down
Propane 81.191 3.312up 10.912up