For the first time in history, China overtook the US as the world’s biggest importer of crude oil in April, as The FT reports, representing the culmination of a seismic shift in global energy flows over the past decade. The jump in China imports last month was partly down to higher shipments from Iran, who “may be offering more discounts on its oil as part of an effort to increase ties with Chinese oil companies,” according to consultancy Energy Aspects. “Iran is keen to secure more Chinese investment.” But as OilPrice.com’s Jim Hinton warns this shift means that China could hold the oil markets to ransom… And that means that oil futures are tied intimately in with China and the future of the South China Sea.
The FT reports,while China’s imports are not expected to consistently surpass those of the US until the second half of this year, the move illustrates how the US shale revolution has cut the country’s reliance on oil from overseas — and how China’s demand has grown even as its economy slows.
Colin Fenton, managing partner at Blacklight Research, said China’s imports increased as it stockpiled oil. “It’s begun,” Mr Fenton said. “China’s crude imports have been above trend in four of the past five months.”
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But the long-term trend is in China’s favour. The country is adding more refining capacity with its economy still growing at more than 7 per cent a year.
In 2013 China overtook the US in combined imports of crude and refined oil products like gasoline and diesel.
“The world has a lot of oil,” one senior trader at a Chinese firm said. “And we need a lot of oil.”
Traders say China no longer passively accepts the prevailing market price, but is intimately involved in how it is set. How much oil it buys from West Africa or the Middle East affects prices from Europe to the US Gulf Coast, and is now as closely-watched as weekly US government data on energy supplies was a decade ago.
