OECD crude oil imports increased in June by more than 1% from the previous month according to preliminary estimated data. Increased crude oil imports from Japan, South Korea, and the USA boosted the number while the decline in OECD Europe brought the number down. The improved refinery situation in addition to demand-related factors supported crude oil imports in June. On an annual basis, crude oil imports remained steady, indicating y-o-y growth of less than 1%. In contrast, product imports fell by 3.5% in June compared to the previous month on the back of relatively better refinery output. Compared to the same period last year, product imports showed a decline of less than 1%. For the first half of 2007, OECD crude oil and product imports indicated a decline of 2% and 6% respectively, compared to the same period last year.
OECD total exports are estimated to remain steady in June compared to the previous month. Crude oil exports indicated a minor increase of 1%, but displayed an annual decline of around 2%. At the same time, product exports increased in June by 1% to mark the highest level since January 2007. Accordingly, OECD net oil imports declined less than 1% on the back of decreasing net product imports in June compared to the previous month, but displayed annual growth of more than 1%. For the first six months of 2007, average OECD net oil imports indicated a decline of 3% compared to the same period of 2006.
Saudi Arabia and Russia remained the largest suppliers of OECD crude oil imports in June with around 28%. On the product side, Russia and the Netherlands remained the top suppliers of OECD products with around 17%.
US crude oil imports dropped 3% in July from the previous month. On an annual basis, US crude oil imports in July remained steady with an increase of around 1%, according to preliminary data. Crude oil imports started July with a decline and then increased toward the middle of the month before declining at the end. The US West Coast and Gulf Coast areas were the major contributors to the decline in crude oil imports with a drop of around 9% in the US West Coast area in July. South America’s exporters of heavy crude oil to the West Coast area were forced to sell some of their volumes to the Asia-Pacific region instead of their usual California market. The decline in crude oil imports in July came at the same time as the increase in refinery utilization rates; hence, crude oil stocks declined and total product stocks increased in July compared to the previous month.
In July, US product imports remained steady with a minor decline of less than 1% from the previous month. The increase in refinery utilization rates was one of the main reasons behind theminor decline, which helped build product stocks, except for gasoline, in July. Imports of heating oil increased in July on the back of open arbitrage from the Baltic area to the USA. Residual fuel oil imports increased as well in July from the previous month. Gasoline imports increased in the USA in line with the decrease in production despite the rise in the refinery utilization rate. Gasoline arbitrage economics from North West Europe to the USA fluctuated in July, although imports increased over the previous month.
On the other hand, US imports of jet fuel and other products declined in July compared to the previous month. US total exports declined on the back of lower product exports in July, which were 4% lower than the previous month. Despite the reported increase in fuel oil exports from the USA to Asia as the arbitrage was open in early July, exports of other products declined bringing US product exports to drop more than 15% on an annual basis. As a result, US total net crude oil and product imports averaged around 2% lower in July compared to the previous month driven mainly by the decline in crude oil imports. On an annual basis, US net oil imports saw an increase of 2%.
In May, Canada remained the main supplier of US crude oil with around 18% followed by Saudi Arabia with more than 15%. Mexico came third with around 14% followed by Venezuela and Nigeria with 12% and 9%, respectively. OPEC countries supplied more than 52% of US crude oil in May. On the product side, Canada remained the US top product supplier in May with 17% followed by Venezuela and the Virgin Islands with 7% each.
Preliminary estimated data show that Japan’s crude oil imports continued the upward movement in July, rising a further 7% from the previous month. The increase in July represented an annual gain of 3.4%. The gradual increase in the refinery utilization rate that took place in July supported crude oil imports as did the requirement for direct crude oil burning for power generation, especially in the high demand period. Additionally, the shutdown of nuclear reactors at Kashiwazaki-Kariwa facilities after the earthquake that hit Niigata created extra crude oil requirements, whether to be refined or directly burned, to cover the gap in meeting electricity demand. Although inventories were sufficient for initial demand for thermal power generation, the supplies of crude oil have increased and are expected to rise further to meet the needs of the coming short-term period. Product imports remained steady with an increase of less than 2% in July from the previous month. Despite the decline, rising imports of fuel oil and residuals offset the decline in gasoline imports due to increased production. On an annual basis, Japan’s product imports fell 10%.
On the other hand, Japan’s product exports experienced an increase of 9% in July from the previous month. Gasoline exports declined despite the arbitrage to the US West Coast on the back of domestic demand in July. Jet fuel and fuel oil exports decreased, as local requirements for the latter rose following the earthquake. On the other hand, gasoil exports increased sharply counterbalancing other product declines on the back of healthy economics fueled by demand from South America and Europe. Product exports in July remained within the annual level increasing by less than 1%.
As a result, Japan’s net oil imports increased by around 6% in July from the previous month, supported by the rise in crude. The increase in product exports trimmed net oil imports which showed a steady-to-firming position of just under 2% compared to the same period last year. It is estimated that OPEC members supplied more than 78% of Japan’s crude oil with Saudi Arabia and UAE remaining Japan’s main crude oil suppliers, together representing in June more than 50%. Iran, Qatar and Kuwait came next with around 5-15% each. For products, Saudi Arabia and the UAE maintained their position as the top product suppliers to Japan together with more than 25%.
China’s crude oil imports rebounded in June with an increase of around 11% from the previous month. The increase, mounting to around 330,000 b/d, indicated an annual gain of around 18%. One of the main reasons for the increase in crude oil imports was the healthy demand for gasoil, gasoline and fuel oil which, in turn, required more feedstocks to refine, as the June refinery utilization rate is estimated to be higher than in May. For the first half of 2007, China imported on average 3,290 mb/d of crude oil with an increase of around 11% compared to the first half of 2006. China’s refinery throughput is estimated to have increased in the first half of 2007 by 7% from the same period in 2006. On the other hand, China’s product imports declined by 13% in June compared to the previous month with a steeper annual decline of around 35% due to improved local production. Imports of naphtha declined in June due to higher international prices as well as adequate domestic supply. Gasoil imports increased in June on the back of lower yield, while imports of jet fuel and gasoline declined from the previous month.
Fuel oil imports increased in June by around 10% from the previous month despite the increase in domestic production which is estimated to be 14% higher. Healthy demand for power generation supported imports even at record-high prices. As well, the effect of the fuel oil import tax reduction that took place in June helped discharge some of the volumes that were held in May. Fuel oil users were seeking lower price materials from sources such as Venezuela. Profits of utility plants and refinery units using fuel oil eroded as the government limits the electricity and product prices while international fuel oil prices reached a record-high. Iran, Russia, South Korea, and Venezuela were China’s top suppliers of fuel oil in June. At the same time, fuel oil exports increased in June as producers managed to take advantage of high international prices which were much higher than domestic ones.
While fuel oil exports increased in June, exports of other products were mixed and the overall image of China’s product exports remained steady with a minor increase from the previous month. China’s gasoline exports increased by around 10% in June from the previous month mainly because May’s exports were low as well as the effect of high international prices. Exports of jet fuel and naphtha increased in line with higher production, while gasoil exports declined sharply in order to meet healthy local demand. China’s product exports in June indicated a monthly increase of 3.5% and an annual increase of 24%. In the first half of 2007, China exported 17% more products than the same period of 2006, as refiners with increased capacity were determined to benefit from the higher export prices than the local ones.
With crude oil exports declining to 54,000 b/d, China’s net crude oil imports averaged around 14% higher in June than the previous month. Hence, China’s net oil imports increased 7.3% in June from the previous month as the drop in net products imports offset part of the net crude import gains. On an annual basis, China’s net oil imports remained steady with the average of the first six months in 2007 higher by 6% than the same period in 2006. Iran was China’s top crude oil supplier in June with 16% followed by Angola and Saudi Arabia with 14% and 13% each. Russia, Oman and Venezuela came next with around 5-11% each.
In June, India’s crude oil imports averaged 5.5% or 137,000 b/d lower than the previous month, marking the second consecutive monthly decline in crude oil imports so far in 2007. The decline in crude oil imports is attributed to preparations for planned refinery shutdowns as well as the unplanned ones that took place in June or that will be coming in the near future. Annually, crude oil imports experienced an increase of around 8%. On the product import side, despite the decline in domestic products sales in June compared to the previous month, India’s product imports remained steady with a minor increase of less than 2%. Domestic sales of diesel, India’s most utilized product which represents around 40% of petroleum product demand, declined slightly with easing consumption in the farm sector. As well, domestic sales of naphtha dropped as LNG supply improved, with petrochemical and fertilizer plants favouring lower-cost LNG. Fuel oil sales increased in India on the back of improved demand from power generation units in June.
On the export side, India’s product exports in June declined around 2% from the previous month. India’s exports of diesel and naphtha increased in June as refiners tried to capitalize on healthy margins created by high international prices relative to domestic ones. On the other hand, exports of gasoline declined as healthy local demand existed as well as jet fuel. India’s product exports indicated a 19.3% y-o-y gain; the increase came on the back of refinery capacity additions. In the first half of 2007, India exported an average of 672,000 b/d of products, marking an increase of around 29% from the same period in 2006.
As a result, India’s net oil imports declined in June for the second consecutive month by around 6%. On an annual basis, India’s net oil imports indicated a drop of around 2%, the first annual decline experienced in 2007. The decline in net oil imports came mostly from the drop in crude oil imports which was influenced by refinery outages in June. For the first six months in 2007, India’s net oil imports indicated an increase of around 4% from the same period in 2006.