Asia’s crude oil imports are on track for another soft month in September, as the world’s top-importing region battles uncertain demand amid high retail fuel prices.
Asia’s imports are estimated at 24.98 million barrels per day (bpd) in September, about the same as August’s 24.9 million bpd and July’s 24.55 million bpd, according to data compiled by Refinitiv Oil Research.
China, the world’s largest crude importer, is the main factor behind the weak trend, with Refinitiv forecasting September imports of around 9.15 million bpd, down from the official customs figure of 9.5 million bpd in August.
The weakness in Asia’s crude imports stands in contrast to a market narrative that global oil supply is tight, thereby justifying prices remaining at elevated levels.
Benchmark Brent crude futures LCOc1 were at $94.53 a barrel in early Asian trade on Thursday, having bounced from a 10-month low of $87.40 on Sept. 7.
Crude prices have retreated from the highs above $120 a barrel seen in the wake of Russia’s Feb. 24 invasion of Ukraine, but so far this has failed to spark any resurgence in demand in Asia.
Part of the problem is that, while crude prices have moderated, in many major countries in the region retail fuel prices have not, thereby dampening consumer demand while stoking inflation pressures, which in turn lead to tighter monetary policy and slowing economies.
The retail price of diesel in China has dropped from a record high of 9.03 yuan ($1.30) a litre in mid-June, but remains at a high by historic standards of 8.10 yuan.
India, Asia’s second-biggest crude importer, has held diesel prices steady for the past five months as the government has tried to limit losses for state-owned refiners, which supply most of the country’s fuel.
A litre of diesel costs 94.27 rupees ($1.19) in Mumbai, down from the 2022 high of around 106 rupees in May, but, as in China, it remains high by historical standards.
In Australia, the national average diesel price in the week to Sept. 11 was A$2.06 ($1.39) a litre, down from 2022 highs of about A$2.40, but also some 37% higher than the price at the same time last year.
Fuel prices in Australia are poised to rise by around 25 Australian cents a litre on Sept. 29, when a six-month temporary cut in excise duty comes to an end.
What becomes clear is that, while many governments in Asia acted to limit the impact of crude’s price surge in the wake of Russia’s attack on Ukraine, retail fuel prices remain at high levels.
This is partly because of high crude prices, but also because of a lack of spare refining capacity in Asia, a situation made worse by the sharp drop in China’s refined product exports in 2022.
China’s exports of refined fuels have slumped 33.5% in the first eight months of the year, removing about 475,000 bpd of diesel, gasoline and other products from the regional market.
What is happening in many Asian markets is something of a paradox, with crude oil prices moderating from their post-Ukraine invasion highs, but retail prices remaining elevated.
It’s hard to make a case for stronger crude demand while retail fuel prices remain high, but it’s equally hard to make a case for lower fuel prices while refiners are struggling to produce enough, and the threat of the loss of Russian fuel exports looms large.