LAUNCESTON- There are emerging signs that crude oil demand is gradually recovering in major Asian countries outside China, a key pre-condition to sustaining any bullish view of the market.
While China’s crude imports have been record-breaking, with the five highest months being the May to September period, the rest of Asia has struggled amid weaker demand caused by lockdowns aimed at curbing the spread of the novel coronavirus.
But China’s run of strong imports is set to end as the last of the cheap crude bought during April’s brief price war between top exporters Saudi Arabia and Russia is finally unloaded. That means it’s vital for any optimistic view of the crude market that the rest of Asia shows signs of life.
India, the second-biggest importer in Asia behind China, is perhaps the best case for optimism, with imports and refinery utilization recovering, although not quite to pre-pandemic levels.
Refinery throughput reached the highest in six months in September, gaining 13.4 percent from the prior month to 4.33 million barrels per day (bpd), according to government data released on Oct. 23.
While this was the best figure since March – the month when India’s first lockdowns were imposed – the September throughput was still 8.7 percent below the same month last year.
India’s crude imports may also have turned the corner. Industry data showed September’s arrivals of 3.48 million bpd were 11.9 percent lower than August’s 3.95 million bpd, but in year-on-year terms the drop was the slowest rate of decline since May, the data showed.
India’s crude imports may also post a stronger October, with Refinitiv Oil Research estimating that arrivals will reach 3.91 million bpd, which would be the highest since April.
Fuel demand in India also appears to be recovering, with preliminary data showing diesel sales are likely to have risen in October for the first time since coronavirus restrictions were put in place in March.
Diesel sales by India’s three state fuel retailers rose 8.8 percent year on year in the first half of October, according to provisional data compiled by Indian Oil Corp, the country’s biggest refiner and fuel retailer.
Japan, Asia’s third-largest crude importer, presents a more mixed picture, with Refinitiv data estimating October imports at 2.05 million bpd, down from 2.42 million bpd in September and 2.36 million bpd in August.
However, the soft imports come as several refineries take units off line for scheduled maintenance, suggesting that once these return to service, imports will pick up again.
