China's implied crude oil stocks as of end-November surged 56.29 million barrels from end-October, registering a record high monthly increment that would likely dampen buying interest for the first quarter of next year.
The last record high for the implied crude stock build was 47.40 million barrels in March 2017, S&P Global Platts calculations based on official data showed.
The country does not release official data on stocks. Platts calculates the country's net build or draw in implied crude stocks by subtracting official refinery throughput data from the country's crude supply data. The latter takes into account net crude imports and domestic production.
The implied crude stocks that Platts calculates does not take into account China's crude oil consumption for any usage other than refining due to a lack of official data.
The high stockpile was due to crude supply hitting a historical high amid a heavy inflow while weak domestic oil product demand led to lower refinery throughput.
China's overall crude supply in November surged 12% from a year ago to 426.17 million barrels, and rose 6% from October led by a sharp increase in net crude imports while domestic crude output was largely rangebound.
Buoyed by strong buying from the independent sector, China's net crude imports soared 17.7% year on year to the record high of 312.33 million barrels in November, General Administration of Customs data showed.
Crude throughput at refineries rose 2.9% year on year to 369.87 million barrels, but retreated from a record high of 386.88 million barrels in October, National Bureau of Statistics data showed. But the increase lagged the sharp growth in crude supply.
This means monthly crude supply was 56.29 million barrels higher than throughput in November.
Looking at the year-to-date figures, by the end of November this year, China's crude stocks rose 247.61 million barrels compared with the level at the end of December last year. Over January-November 2017, the country's crude stocks increased 288.85 million barrels from end-December 2016.
BUYING INTEREST LIKELY TO BE HIT
"Heavy stock build in November will dampen crude buying interest for early 2019 delivery, and we [don't] expect China's crude oil imports [to] hit a high until April next year," a Beijing-based crude trader said.
"Slow domestic oil product demand, high crude stocks and [weakening] international crude prices will discourage crude buying," a Hong Kong-based analyst said, adding that the heavy crude imports over recent months were mainly driven by the independent refineries' attempt to use up their crude import quotas by the end of the year.
Buyers are reluctant to purchase barrels until it is clear that there will be no further decline, market sources said.
In addition, independent refiners would have to consume their crude stocks first early next year, before bringing in more barrels, they added.
Front-month ICE Brent crude futures fell to a 15-month low of $54.56/b at 0430 GMT on December 21.
At the same time, throughput demand has been weak as gasoline sales have slowed. Refining sources from Sinopec said they were required to reduce their throughput slightly in December to lower oil product output, while independent refiners reflected similar moves.
This also means that crude stocks would continue building in December on high crude imports from the independent sector but a slowdown in refinery throughput across the country.
