US and China heat up competition for oil
By Oscar Jacobsen in Oslo
Published: 21.05.2004 | Last updated: 21.05.2004
The US Energy Information Administration says the US will have to import more oil than ever before to keep up with demand this summer. As much as 10.4 million barrels of crude oil per day will have to cross the Atlantic to keep up with surging demand in the new world. China too, is boosting its imports. The world's most populous nation has already increased oil imports by 41% in the first quarter. There is little fear that the crash in dry bulk freight rates will transfer to the tanker market.
The EIA, which is the statistical arm of the US Energy Department, said in its weekly report this week that the US would have to import an average of 10.4m barrels of oil a day for the entire summer. If not, refiners would have to start using stored oil from their already low inventories.
The US is facing a gasoline shortage this summer, as both domestic and overseas refiners are unable to supply states such as New York, Connecticut and California with product which meets the newly introduced environmental restrictions. According to the EIA, April's gasoline imports have already begun to reflect the problem by dropping as much as 20% compared with April 2003. The American Petroleum Institute. says this has prompted US gasoline inventories to fall this April for the first time since 1997.
The dramatic fall in refiners' inventory come in spite of US refineries operating near capacity, producing record volumes of motor spirits. The reason for the surge in demand is that more US holidaymakers are staying in their home country for fear of terrorism overseas. They are expected to take to the roads instead.
But China needs more oil too. China's net crude imports rose 41% year on year from January to April. So far this year, Chinese buyers have chartered 60 VLCCs to carry West African and Middle Eastern crude oil. In the previous 12 months, the same charterers booked a total of 124 VLCCs, indicating a 29% increase in the number of VLCCs used by Chinese importers, year on year.
"China's oil import growth continues to outstrip even upwardly revised expectations and is a major factor explaining why there has not been the usual seasonal build in global oil and petrol inventory so far this year," reports the Financial Times in London citing a report by Barclays Bank.
Crude oil imports in China rose 26.7% year on year to 10 million tonnes in April, according to China's General Administration of Customs. Crude imports totalled 40.14 million tonnes in the first four months of this year, up nearly 41% from the year-earlier period.
This week, Saudi Arabia, the UAE, Algeria, Libya and Nigeria said they would be pumping more oil than their agreed quotas at OPEC would normally allow. There is now widespread belief that OPEC will in fact increase its official production targets at the next meeting in Beirut, in early June. This is in spite of the cartel's admission that members are quota-busting freely, and that the group is powerless to act against record high oil prices.
The Russians too say they will be doing their bit. Russia's two largest exporters Yukos and Lukoil both said they are increasing their production and export targets this year, despite some difficulties getting their oil to market because of creaking infrastructure at ports and in the national Transneft pipeline system.
US buyers are over the next few weeks likely to try to buy as much crude as they can, but in stiff competition with China's ever growing oil majors. VLCC's positioned in the ME Gulf, West Africa and the Mediterranean could become very busy and stay that way through the summer.
