Goldman Sachs expects China's crude oil imports to remain at reduced levels in the coming months if prices remain high, pushing back against expectations of a sharp rebound in Chinese demand. The bank's models point to only a modest pickup through the fourth quarter, with import composition shifting away from sanctioned supply.
Goldman sees import levels stuck near current lows
Goldman Sachs analysts said China's crude oil imports will likely remain at reduced levels in the coming months if prices stay high. This counters market expectations of a sharp recovery in Chinese demand.
China's crude oil imports have fallen sharply over the past six months, helping to stabilize the oil market as the country turned to power, coal, and existing crude inventories to meet energy needs. Persian Gulf oil exports remain about 6 million barrels per day below pre-war levels despite a September increase.
Import mix shifts away from sanctioned crude
Seaborne Chinese crude net imports rose 6% in September compared to August, but remain nearly 3 million barrels per day below normal seasonal levels. The composition of imports has also shifted: Russian and Iranian crude dropped from half of total imports in August to less than one-third in September. As a result, this change to non-sanctioned supply has increased demand for openly traded crude benchmarks.
Two forecasting methods point the same way
Goldman Sachs used two analytical approaches to forecast import levels. The first method examined crude and product balances, projecting China's total crude imports will rise only 0.6 million barrels per day in the fourth quarter from the third quarter. This increase stems from slightly higher refined product exports and slower product-stock draws, with gasoline and diesel stocks at their lowest since mid-2019.
The second method employed a statistical model based on China's imported crude price basket, refined product stocks, lagged imports, and seasonal patterns. This model indicates a small pickup in crude imports in September but a return to August levels in October.
The bank estimates that a 1 million barrel-per-day change in China's crude net imports over six months affects Brent fair value by $4 per barrel. Goldman Sachs continues to view a possible escalation of strikes on Middle East crude production and export infrastructure as the main upside risk to its crude price forecast, rather than higher China imports.
Source: Investing.com
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