China is restocking its oil reserves

The People's Republic of China has initiated the process of constructing oil inventories once more.

During the month of October, Chinese refiners transitioned from actively extracting oil to steadily amassing oil reserves, with a daily accumulation rate exceeding 500,000 barrels.

According to Reuters' Clyde Russell's calculations, which are based on official import and processing numbers from Beijing.

According to Russell, Chinese refiners were adding oil to stockpiles at a pace of 560,000 barrels per day in October, as production decreased but imports increased.

This has been the refiners' behavior for the majority of the year. According to Russell, Chinese refiners added to stockpiles for seven of the 10 full months since the beginning of 2023 and drew from inventories for the remaining three.

When worldwide oil prices begin to rise, refiners typically draw on stocks. They drew from inventories in the months of April, July, and September this year.

The net changes in inventories over the ten months since January total 680,000 barrels per day on average.

Last month, China's imports averaged 11.53 million barrels per day, slightly higher than the 11.13 million bpd average for September. The government granted a second batch of oil imports the same month, boosting the total import quota for 2023 to a level 14% higher than the total for 2022.

Domestic demand for oil, meanwhile, has been declining, according to analysts. A multitude of factors contributed to the decline, including weaker refining margins, increased levels of stockpiles in both fuels and oil, and a slower-than-expected increase in air traffic.

Lower refining profits pushed down processing rates to 15.05 million bpd, according to Reuters' Russell, down from 15.48 million bpd in September, a record high.

At present, there is an anticipation of a substantial decline in fuel exports for China, as its refiners are nearing the point of depletion for their export quotas. An energy data company named OilChem suggests that the expected drop in exports during November might reach as high as 40%.