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Imports of crude oil from China remained weak in August. Can this trend continue? Russell

China's crude oil imports by sea increased in August compared to July, but were still nearly 40% below levels prior to the Iran conflict.

According to Kpler, China's largest oil importer saw seaborne arrivals increase from 6.93 million barrels a day in July to?7.14 million bpd in August.

August's imports fell by 4.27 % below the average of 11,41 million bpd during the three months preceding the U.S.-Israeli attack on Iran, which took place on February 28.

China is absorbing the majority of the Middle East's lower crude oil volumes, as its exports are falling due to the restricted flow through the Strait of Hormuz.

While there are disagreements over the exact amount of crude oil and refined product that is getting through the narrow waterway, it's certain that the number is well below the 20 million bpd prior to the conflict.

Asia's seaborne crude imports in August were 22,64 million bpd. This was down from 23.40 millions bpd a month earlier, but still 4.29 million below the 26.93million bpd average for the three-month period ending in February.

The decline in Asia's seaborne?oil?imports is only 20,000 barrels per day more than China's arrivals.

The?amount of the drop surprised most participants in the crude oil market. They expected Beijing to reduce its imports as a response to higher prices due to the conflict with Iran.

China is known to cut imports during price surges, but boost them when prices drop.

Benchmark Brent crude futures rose 75% since the beginning of the conflict, reaching a four-year peak of $126.41 per barrel on April 30, a price that was unprecedented in the past. On September 4, they moderated their price to $96.28 per barrel, but it is still above the level that many Chinese refiners are comfortable with.

China's refiners may be looking to secure cargoes to avoid having to dip into their inventories.

IRAN, RUSSIA FLOWS

Answering that question involves several factors.

First, China's smaller independent refining companies are losing their access to Iranian crude because the U.S. blockade prevents any new Iranian crude from leaving the Gulf. The oil in tankers is also delivered and depleted.

These refiners will either need to pay more or reduce their processing rates for the cargoes they receive from other suppliers.

China buys more oil from Russia, a country also under Western sanctions. However, this puts China in direct competition with India, as refiners from the South Asian nation have replaced Middle East crude with Russian crude.

Kpler data shows that China's seaborne exports to Russia in August reached 1,68 million bpd, up from 1,40 million bpd during July, and the highest since March.

China also purchases about 1 million barrels per day via pipelines.

A factor to consider is whether China’s refiners are trying to export more refined fuels. This is because of the high profit margins that are currently available in Asia on products like diesel and gasoline.

Exports of middle and light distillates reached 963,000 barrels per day in August. This is up from the average of 713,000 barrels per day for the three-month period prior to the beginning of the Iran War.

The increase in light and middle distillates in August 'almost exactly matches that of crude imports.

This may be just a coincidence but it illustrates the larger point that, if China increases its product exports, then it will also have to increase its crude imports.

China's decision not to import crude oil has played a significant role in preventing the price of oil from rising since the beginning of the Iran War.

Its lack of exports from April to June is another factor that keeps fuel prices high in Asia.

It may be a better option for the market to have China buy more crude oil but also export more fuel.

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These are the views of the columnist, an author for.

(source: Reuters)