Drop in Economic Growth hurts China’s Oil Imports

China’s oil imports may have declined in March, a Reuters poll of 31 economists showed on Monday, while experts expect China’s economy to have sharply contracted in the first quarter of the year due to the coronavirus pandemic.  

China, the world’s top oil importer and key oil demand growth driver, went in lockdown at the end of January and February to try to stop the spreading of COVID-19. As a result, demand for energy for industrial activity and for fuel sharply dropped.

Chinese oil imports held up in the first two months, because volumes had been contracted weeks before the first public announcement of the virus and because Chinese refiners typically stock up on crude before the Chinese Lunar New Year, which was at the end of January this year. China’s crude oil imports increased by 5.2 percent on the year in January-February to come in at 10.47 million barrels per day (bpd), according to Reuters calculations on data from the Chinese General Administration of Customs.

In March and early April, China was said to have been building its crude reserves, thanks to the cheapest oil in years, but the rate of filling storage would be lower than in previous years because of limited storage capacity, lending less support to oil prices this time around than in previous years, Wood Mackenzie said at the end of last month.

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Oil imports, however, are just a part of China’s trade and economy, which as per the Reuters survey, are expected to have contracted in March because of limited demand from overseas amid lockdowns in major other economies.

According to economists polled by Reuters, China’s first-quarter GDP likely contracted sharply, for the first time in nearly 30 years, since 1992.

While China reopened cities and the economy, the rest of the world started to close down to try to flatten the curve of the coronavirus cases.

“Despite some possible improvements in economic activity in March, first-quarter GDP growth is expected to contract by 10% from a year earlier,” Tao Wang, an economist at UBS, told Reuters, referring to the Chinese economy.


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