China's stockpiling of crude oil appears to have increased in the first two months of the year, despite prevailing higher prices caused by OPEC and its allies curbing output.
The country rarely releases detailed inventory levels for strategic and commercial storage, but it's possible to work out an estimate of net crude imports, domestic output, and refinery throughput.
In the first two months of 2017 the total amount of crude available from net imports and domestic output was 96.72 million tonnes, equivalent to about 11.97 million barrels per day (bpd), according to official statistics.
The refinery throughput for January and February was 90.76 million tonnes, or about 11.23 million bpd, according to data released on Tuesday by the National Bureau of Statistics.
On a daily basis, the runs for the first two months of the year were the second highest on record, just behind December's 11.26 million bpd. The bureau provided only numbers for the first two months in order to smooth the impact of the Lunar new year holidays.
Subtracting the amount of crude processed by refiners in the first two months of 2017 from the total amount available leaves about 740,000 bpd, most of which is likely to have flowed into commercial or strategic storage.
This is slightly higher than the 732,800 bpd gap between available crude and the amount refiners processed over the whole of 2016.
While this isn't a major increase, it does come against a backdrop of higher prices over the period when crude that arrived in January and February would have been booked.
Brent crude jumped from a close of $46.38 a barrel on Nov. 29, the day before OPEC and its allies agreed to curb output by 1.8 million bpd for six months starting January, to a peak of $57.10 by Jan. 6.
This implies that the higher crude price was no deterrent to China's efforts to fill its strategic petroleum reserve (SPR) to reach 90 days of import cover, with the process estimated to be less than half complete so far.
Brent has since slipped back as investors took the view that OPEC's actions aren't doing enough to drain excess inventories from the global crude market, with the price slumping to close at $50.92 a barrel on Tuesday.
If anything, the lower price may encourage increased buying for stockpiling by China, but that may only be seen from April imports onwards.
It is possible that March crude imports may dip from the breakneck pace of the first two months of the year, with Thomson Reuters Supply Chain and Commodity Forecasts estimating China will bring in 31-32 million tonnes, down from the 34 million received in January, but more in line with February's 31.78 million.
Product exports steady
Another factor that appears to be driving China's crude imports is the level of exports of refined products.
For the first two months of the year, this was 7.3 million tonnes, equivalent to about 990,000 bpd, which is slightly less than the 1.06 million bpd recorded for 2016 as a whole.
There is no doubt that part of last year's 13.6 % jump in crude imports was because of the 33.7 % surge in product exports.
However, so far in 2017 it looks to be fairly steady as far as exports of refined fuels go, and much will depend on whether the authorities in Beijing grant more quotas for exports.
Already Beijing has signaled that it won't allow smaller, independent refiners to export this year, ending a year-old policy to allow some of them to sell diesel, gasoline, and naphtha to overseas markets.
While the independent refiners accounted for only a small slice of China's overall product exports, any indication that Beijing will act to curb fuel exports may result in slower growth in crude oil imports.