Why Chinese crude oil imports are surging?

China imported 25.68 million tonnes or 6.27 million barrels per day of crude oil in September, according to the Customs General Administration. It was 27.9% higher than a year ago and renewed the historical record.

The country's monthly crude oil imports were sometimes below the previous year level during the first half of this year, since China stored crude oil into newly built strategic reserve facilities in the first several months in 2012. But the monthly import figures have scored double digits growth in the last three months.

Meanwhile, commercial crude oil stocks as of the end of August were 9.7% higher from a month ago, according to the Xinhua News. The record high import level in September could have caused a further significant increase of Chinese crude oil stocks.

Although stocks of petroleum products in China as of end-August decreased 5.3% from a month ago, it was still 8.5% higher from a year before. So it seemed that Chinese refineries were not strongly required to build product inventories so much during September ahead of long holidays in early October.

However, China's industrial production index rose 10.4% on year in August, it was the first double digits growth since last December. Refineries might have started securing crude oil inventories on expectations of further steady petroleum demand from the industrial sector.

Chinese refineries usually set the annual highest crude oil processing during the 4th quarter and the following year's 1st quarter. The country's crude oil processing exceed 10 million bpd between November 2012 and February 2013, but it has recently been decreased to the 9 million bpd level first half. The higher crude oil imports could suggest beginning of another round of growth of crude oil processing towards the end of this year.

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