UPDATE:China Taps Middle East For Crude As Demand Surges
DOW JONES NEWSWIRES
September 25, 2006 1:54 a.m.
By David Winning
Of DOW JONES NEWSWIRES
BEIJING (Dow Jones)--Crude cargoes arriving from the Middle East enabled China's oil imports to rebound in August, but underlined how far the world's second-largest oil consumer has to go to diversify its supplies away from the trouble-prone region.
Shipments from Saudi Arabia, Iran and Oman surged by more than 50% each in August compared with a year earlier, as China faced up to spiraling domestic demand in summer and the inability of its own aging fields to guarantee enough supplies.
Chinese leaders have been courting crude suppliers from Africa to South America this year after becoming concerned that a reliance on one region as the source of the country's imported oil was putting its energy security at risk.
Conflict in Iraq, recent hostilities between Israel and Hezbollah militants in Lebanon, and a diplomatic standoff over Iran's nuclear program have added to China's urgency to diversify its oil sources away from the Middle East.
But a lack of spare production capacity outside the region combined with robust domestic demand triggered by new refineries starting operations and more Chinese traveling in cars and planes, put a lid on these ambitions in August.
According to data from the General Administration of Customs issued Monday, China's oil imports rose 34.8% on year in August to 11.8 million metric tons, or an average of 2.79 million barrels a day, recovering from a surprise drop in July.
Although the data confirmed preliminary figures issued earlier this month, they also included more detail such as the sources and volumes of China's oil imports.
Crude cargoes from Saudi Arabia rose by 52.7% on year in August to 2.25 million tons, outstripping the 7.6% annual growth rate seen during the first eight months of 2006.
Iran dispatched 60.2% more oil to China in August, while crude imports from Oman rose by 154.6% during the month compared with the year-earlier period. This compared with respective growth rates for January to August of 15.3% and 12.2% respectively.
Together it meant that the three Middle Eastern producers accounted for 43.3% of China's oil imports in August, the data showed.
The rise in crude imports from the Middle East is likely to drive speculation that China is snapping up available barrels for its strategic oil reserves, ahead of confirmation next month that the first tanks at Zhenhai in the coastal Zhejiang province are ready for use.
The Chinese foreign ministry confirmed this summer that it and Saudi Arabia were in discussions about energy cooperation - including oil reserves - but analysts expect the timing of filling the tanks to be kept secret to avoid oil traders bidding prices higher.
Monday's data showed that China imported 95.8 million tons of crude from all sources between January and August compared with the same period of 2005, while its oil exports totaled 732,111 tons or 173,109 b/d of crude oil - up 45.2% from a year earlier.
China's imports of fuel oil rose 55.9% on year to 3.1 million tons in August, helping to overcome a serious shortfall of electricity in the south of the country.
Small power plants use fuel oil to generate electricity, while refineries use it as a feedstock to produce off-specification diesel.
Imports of diesel to China rose 9.4% year on year to 25,742 tons during the same period, as more people in the country's south used diesel-powered generators to offset a drop in electricity produced from hydropower.
The figures also showed that exports of gasoline fell 62.7% on year to 315,363 tons in August.
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