Chinese oil demand fell significantly in March-April 2022 due to COVID lockdowns. State-run refineries have reportedly cut utilization rates to two-year low. Independent refiners may have faced a greater challenge due to localized lockdowns and logistical disruptions in Shandong province. Therefore, refinery throughput is expected to decline.
As a result, ESAI Energy estimates that a huge increase of stockpiling occurred . According to our model, Chinese crude oil stocks have reached an all-time high in April, as the chart below illustrates.
Oil demand is projected to come back in the third quarter, butt here is significant downward risk to this recovery. This is because the situation in Shanghai, as well as the response to the crisis from the Chinese top leadership, are encouraging more cities to take strict measures. For example, while Shanghai is still under lockdown, Beijing is putting more neighborhoods under quarantine.
Between weak, uncertain demand and record high stocks, we believe that crude oil imports could fall for the next three months before recovering in the last quarter