China oil imports surpass those of US for first time

China overtook the US as the world’s biggest importer of crude oil in April, the culmination of a seismic shift in global energy flows over the past decade.

Chinese customs data showed crude oil purchases from overseas hit a new high of 7.4m barrels a day in April, equivalent to roughly one in every 13 barrels consumed globally and topping US imports of 7.2m barrels a day. The US routinely exports about 500,000.

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.”

The jump in imports last month was partly down to higher shipments from Iran, according to consultancy Energy Aspects. China Oil also bought a record number of Oman and Abu Dhabi crude cargoes last month, in a public trading window that helps determine the region’s benchmark prices.

“Iran may be offering more discounts on its oil as part of an effort to increase ties with Chinese oil companies,” said Amrita Sen at Energy Aspects. “Iran is keen to secure more Chinese investment.”

China’s state-backed traders are taking a much more visible role in the global crude market. They have steadily built up more sophisticated operations to compete directly with established trading desks at western oil companies like BP and Royal Dutch Shell, banks like Goldman Sachs, and commodity dealers like Vitol and Glencore.

In the US, higher prices and more efficient motor vehicles curbed consumption in the aftermath of the financial crisis, while the surge in shale oil output over the past three years has reduced imports.

Producers are now chafing at government restrictions on US crude exports that date back to the oil shocks of the 1970s. “It makes no sense that other countries can sell their crude into US markets, while US crude is essentially landlocked,” said Doug Suttles, chief executive of the Encana oil and gas company.

US imports could rebound in the short term, traders say, with fuel demand boosted by the collapse of oil prices to $65 a barrel. The price fall has also sharply reduced drilling activity in US shale regions such as North Dakota.

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.

“The world has a lot of oil,” one senior trader at a Chinese firm said. “And we need a lot of oil.”

China’s emergence as the top crude importer could influence how global crude oil deals are priced and affect the relations of Beijing and Washington with producers in the Middle East.

From last year:

China is now the world’s largest net importer of petroleum and other liquid fuels
http://www.eia.gov/todayinenergy/detail.cfm?id=15531
MARCH 24, 2014

In September 2013, China's net imports of petroleum and other liquids exceeded those of the United States on a monthly basis, making it the largest net importer of crude oil and other liquids in the world. The rise in China's net imports of petroleum and other liquids is driven by steady economic growth, with rapidly rising Chinese petroleum demand outpacing production growth.

U.S. total annual petroleum and other liquids production is expected to rise 31% between 2011 and 2014 to 13.3 million barrels per day, primarily from tight oil plays. In the meantime, Chinese production will increase at a much lower rate (5% over this period) and is forecast to be only a third of U.S. production in 2014.
On the demand side, China's liquid fuels use is expected to reach more than 11 million barrels per day in 2014, while U.S. demand hovers close to 18.9 million barrels per day, well below the peak U.S. consumption level of 20.8 million barrels per day in 2005. U.S. refined petroleum product exports increased by more than 173% between 2005 and 2013, lowering total net U.S. imports of petroleum and other liquids.

China has been diversifying the sources of its crude oil imports in recent years as a result of robust oil demand growth and recent geopolitical uncertainties. Saudi Arabia continues to be the largest supplier of crude oil to China and in 2013 provided 19% of China's 5.6 million barrels per day. Because production levels from Iran, Libya, and Sudan and South Sudan dropped since 2011, China replaced the lost shares of crude oil and other liquids imports from these countries with imports from Oman, Iraq, the United Arab Emirates, Angola, Venezuela, and Russia.

The is primarily because the US is increasing domestic production. They US doesn’t need to import - the Chinese do.

This is not a sign of chinese growing economic power, but rather that they will be screwed if they can’t get any imported oil.

Hint: if we go to war with China, the first thing we need to do is block the Strait of Hormuz.

Yes, their imports are rising and ours are falling.

if we go to war with China, the first thing we need to do is block the Strait of Hormuz.

I would recommend the Strait of Malacca instead. That way we don't go to war with Europe at the same time. But we would still need to work some out Japan as well.

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