China’s National Energy Commission announced the country’s production goals of oil and natural gas for 2020.
Crude oil sits at 193 million tons (or 3.8 million bpd) and 181 billion cubic meters of natural gas, compared with the actual production of 191 million tons of oil and 173.6 billion cubic meters of natural gas.
The agency intends to develop new energy, including renewable sources, increase electric power without using fossil fuels to 900 GW, and reduce the share of coal in the country’s energy balance to 57.5%.
China is committed to ensuring its energy security.
There have never been and have never been market-motivated rules in the energy sector. Hydrocarbons are the fuel of the global economy. And the world is arranged so that the engine of the global economy is in one place, and the fuel for it in another.
Meanwhile, Chinese imports of oil and natural gas from Russia are rising.
China’s crude oil throughput in May rose 8.2% year-on-year (YoY) following independent refiners increasing production in response to the growing fuel demand as coronavirus lockdown restrictions ease, according to Reuters.
For the first five months of the year, throughput has averaged 12.55 mmbbl/d, a 1% decrease from 2019’s levels due to large processing cuts in February and March this year.
China’s March crude oil imports from top supplier Saudi Arabia fell 1.6% from a year earlier, while purchases from No.2 supplier Russia rose 31%.
China’s March crude oil imports rose 4.5% year on year to 9.68 million barrels per day (bpd) as refiners stocked up on cheaper cargoes despite falling domestic fuel demand and cuts in refining rates due to the impact the COVID-19 pandemic.
Recent indicators for China, which is also the largest importer of oil and gas in the world, were encouraging and indicate the energy market is shaking off the virus shock. Crude oil imports climbed by 1.7% from March, to 40.43 million t, or the equivalent of 9.84 million bpd, according to data released by Chinese customs on May 7th.
Natural gas imports, comprising LNG and pipeline supplies, stood at 7.67 million t in April, up on both March and a year earlier. The increase was driven by higher LNG imports, which climbed by 12.3% year-on-year, to 5.1 million t.
Higher consumption has supported rising imports. Chinese oil demand plunged by 20% in March after the country entered lockdown in February.
But demand is set to recover to around 13mn bl/d in the second quarter of this year, which would be 16.3% higher than in the preceding quarter, according to Wood Mackenzie. The consultancy forecasts China’s oil demand is to rise by a modest 2.3% year-on-year for the first half of 2020, to 13.6 million bpd.
April’s indicators suggest China’s gas demand emerged largely unscathed from the economic standstill in the first quarter, but a lack of storage data means it is unclear how much of the gas—produced domestically or imported—has been stored instead of consumed.
The increased purchases from Russia come down to two reasons:
- Diversifying purchases, and reducing reliance on Saudi Arabia, which proved a risky partner by beginning the crude oil price war in March 2020;
- Strengthening the alliance between Moscow and Beijing. Russia is currently struggling economically, and in this way, Beijing is assisting it, all the while guaranteeing support in some future economic and otherwise endeavors.
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