Asia Pacific crude imports are likely to have dropped by more than 300,000 b/d in 2021, the second year in a row, as India’s import growth was more than offset by declines from China, South Korea, and some other Asia Pacific countries with details elaborated in Asia-Pacific Oil Market Forecast. Tepid crude buying last year was related to massive crude draws from high levels built in 2020 in commercial petroleum reserve (CPR) tanks across the region on top of strategic petroleum reserve (SPR) releases in selected Asian countries starting from Q4 last year.
Lower-than-expected demand recovery caused by coronavirus resurgence in some Asian countries also slowed weakened crude imports. Additionally, China’s crude production is estimated to have increased by more than 2 per cent in 2021, recording the fastest growth since 2019 when the country reversed the trend of a four-year decline, which marginally contributed to China’s falling crude imports.
Looking into 2022, Platts Analytics expects Asia Pacific crude imports to reverse the two-year downturn and increase by 1.7 million b/d as the region’s refineries are likely to run 1.4 million b/d more crude while production continues to decline by more than 100,000 b/d.
While all growth is ultimately driven by Asia‘s petroleum product demand, which will likely rebound by 1.7 million b/d, higher growth of crude imports than runs is largely attributed to 1) major Asia Pacific buyers will likely begin rebuilding crude stocks this year, depending on market structure and stocking economics, to refill some empty SPR and CPR tanks as well as to fill tanks of new refineries; 2) part of incremental demand, particularly in Thailand, India, Japan, Malaysia and Australia, will likely be driven by petrochemical demand with feedstock mostly sourced from natural gas liquids (NGLs) rather than crude; 3) biofuel demand, including biodiesel and ethanol, will keep growing in Asia Pacific, primarily in China, India, Indonesia and Thailand, reducing the call on regional refinery runs by around 50,000 b/d.
Platts Analytics estimates that 1.1 million b/d out of Asia’s 1.7 million b/d crude import growth this year will likely come from the Middle East, if Asian crude buyers follow similar buying patterns in 2021. Additional supply of 1.1 million b/d from the Middle East seems plausible as Middle East producers are expected to ramp up crude production by around 3 million b/d in 2022, given the easing cuts of OPEC+.
Yet recovering runs in the Middle East, along with ramping up rate of Saudi’s Jizan refinery and Kuwait’s Al-Zour refinery, will potentially constrain the growth of crude outflows from the Middle East at around 2 million b/d in 2022. This is not to mention there are growing risks imposed by a rupture in Iran nuclear talks, which will impact 700,000 b/d return of Iranian crudes from April through December 2022, and thin spare capacity of OPEC+, which will fall to average 700,000 b/d in H2 2022. Any escalation of these risks on the supply side will complicate the recovery path of the Asian crude buying, further impacting crude runs as well as Asia product trade flows. [Courtesy: (S&P Global Platts Analytics]
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