China's US Crude Imports Giving OPEC a Headache

China's import of US crude oil crossed 1 million tons for the first time in June, an eightfold rise year-on-year, as elevated Dubai prices prompted both state and independent refiners to use it as an opportunity to diversify supplies, a trend that could add to the headache of OPEC suppliers.

While shipments from the US to China hit 1.09 million tons, or 268,000 barrels per day, in June, imports from Saudi Arabia fell to a six-month low of 940,00 bpd in the same month, a sign that China is more than willing to shed its dependence on OPEC supplies and widen its feedstock sources as much as it can, Platts reported.

"China's imports from the US in the second half of this year is likely to go up because of expectations that the supplying country will lift production, thereby boosting availability," said S&P Global Platts senior analyst, Song Yen Ling.

China's imports from the US have multiplied from just about 34,034 bpd a year ago. June 2017 import volumes were also 49.1% higher than May imports of 179,442 bpd, data released by the General Administration of Customs showed.

A closer look at the cumulative import numbers shows OPEC's share in the world's second-biggest oil consuming market fell to around 55% in H1, from 58% in the same period a year earlier. Market participants said OPEC's share is unlikely to rebound in H2, as Saudi Arabia's crude exports are expected to be more or less capped at the current level because of OPEC-led efforts to clear the global oil supply glut.

Prompt WTI has largely been at a discount to prompt Dubai so far in 2017, making US exports attractive to Asian refiners.

A surge in the appetite for US crudes has emerged on the back of significant discounts at which US crudes are offered against global benchmarks. Crude oil vessels normally take around 53 days to sail from the US Gulf Coast to China.

China's overall crude oil imports in June was up 17.9% year-on-year to 8.82 million bpd, from 7.48 million bpd, while its cumulative imports in the January-June period was up 14.5% YOY to 8.6 million bpd, from 7.51 million barrels. Crude shipments from Saudi Arabia to China fell to a six-month low of 940,456 bpd in June, a drop of 15.7% YOY, which is also 13.2% lower than May's level.