China Boosts Oil Buying After Lunar New Year

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China's oil market outlook has brightened following a surge in travel during the Lunar New Year holiday, raising hopes for a sustained demand recovery, as reported by Bloomberg.

China has been actively buying crude cargoes globally since the mid-February holiday, even increasing its term supplies from Saudi Arabia for March. While purchase volumes remain steady compared to the previous month, they come ahead of refinery maintenance periods when imports typically decline.

Buoyed by stronger-than-expected travel numbers during the Lunar New Year holiday, some Chinese refineries are considering increasing production or delaying maintenance work. This development comes as China's spot crude oil purchases have also been slightly exceeding expectations.

The Lunar New Year, a major holiday period marked by widespread travel, serves as a crucial indicator for the Chinese economy, which has faced challenges since reopening over a year ago. This year, travel and spending surpassed pre-pandemic levels despite ongoing financial pressures on households, translating to increased demand for fuels like gasoline for Chinese refiners.

Mysteel OilChem forecasts an 18% rise in offline refining capacity for 2024, reaching a three-year high. While most of this increase is expected in the second and fourth quarters, the majority of crude cargoes bought this month will arrive in May.

This development comes as a welcome sign for oil markets, which had previously factored in weaker Chinese consumption for 2024. Notably, these purchases are occurring despite planned refinery maintenance halts, suggesting continued elevated run rates at operational facilities.

Earlier this year, China's oil demand growth was expected to slow to around 4% in the first half of 2024, with a forecasted increase of 500,000 barrels per day compared to over 1.5 million barrels per day in 2023

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