Hong Kong (Platts)--11Aug2009

China's crude oil imports soared to a record high of 19.63 million mt
(4.65 million b/d) in July on growing fuel demand and attractive refining
margins, preliminary figures released Tuesday by the country's General
Administration of Customs showed.

Last month's crude imports surpassed the previous peak of 17.3 million mt
by 13.47% set in March 2008--a time when the country was busy stockpiling for
an anticipated run-up in demand prior to the 2008 summer Olympic Games held in
Beijing last August.

The July figure represented a 42.3% spike on the year as compared with
13.79 million mt imported in July 2008. It was also 18.2% higher than June.

Chinese crude exports reached 430,000 mt (101,400 b/d) last month, a
43.3% jump from 300,000 mt in June and 65.4% higher than a year ago.

Even after deducting last month's crude exports volume, China's net crude
imports were still at an all-time high of 19.2 million mt.

STRONG FUEL DEMAND, COMMERCIAL RESTOCKING

"The July figure is not a fluke, nor is it driven by artificial strategic
petroleum purchases," said Mirae Asset Securities' head of energy research
Gordon Kwan.

Senior Chinese government officials said earlier that the country had
already stockpiled its Phase I strategic crude reserves of 16.4 million cubic
meters (about 103 million barrels).

"Rather the record number is driven by strong fuel demand and commercial
restocking," Kwan added.

A pricing regime implemented by Beijing since the beginning of this year
for oil products sold in the domestic market also gives Chinese refiners
incentives to produce. The pricing mechanism is not only pegged to a basket of
international crudes, but includes "reasonable" refining costs and margins as
set by the central government.

As a result, Chinese refiners like Sinopec are more motivated to import
additional crude to take advantage of recovering fuel demand and record-high
refining margins, analysts said.

Meanwhile, China's oil products imports were at a 12-month high of 3.8
million mt in July, some 13% less than 4.37 million mt of imports a year ago.

The July volume was 5.85% higher than 3.59 million mt in June.

Last month's oil products exports reached 2.15 million mt, rising 31.1%
from a year earlier but 12.6% less than June's 2.46 million mt.

According to Mirae's Kwan, measures under Beijing's Yuan 4 trillion ($586
billion) economic stimulus program have spurred automobile sales in China for
six consecutive months and improved industrial activity, which will in turn
sustain the ongoing fuel sales volume growth.

For the first seven months of 2009, Chinese crude imports stood at 110.4
million mt (3.83 million b/d), rising 5.8% from 104.32 million mt (3.6 million
b/d) in the same 2008 period.

Chinese producers exported 3.02 million mt (104,130 b/d) of crude in
January-July, a 40.5% surge over 2.15 million mt in the same 2008 period.

Oil products imports totaled 23.39 million mt in the first seven months
of this year, 8.6% less than 25.59 million mt recorded in January-July 2008.

Oil products exports rose 31.3% during the comparison periods to 12.57
million mt.

CRUDE IMPORT COSTS HAVE RISEN THREE-FIFTHS SINCE JAN

While China imported in July 42.3% more crude than a year ago, its crude
procurement bill for the month fell 25.4% on year, as international crude
prices have slumped from record highs a year ago amid global recession.

The country paid $9.52 billion for its crude imports requirement last
month, versus $12.77 billion in July 2008. This was equivalent to an average
$66/barrel that Chinese oil companies paid for crude imports on a C+F basis in
July, $59.95/b or 47.6% less than $125.95/b a year ago.

But with international crude oil prices rising from the $30s/b early this
year to around $70/b currently, Chinese refiners have also seen their
feedstock import costs growing from a low of $41.13/b in January this year to
April's $45.7/b and $50.43/b in May. The average crude import cost last month
shot up by almost $10/b from June's $56.42/b.

The average per-barrel cost of crude imports in the first seven months of
2009, however, remained 50.48% lower than the prior year, at $50.39/b against
$101.75/b in the same period of 2008.

Weaker global crude prices versus a year earlier, however, also hit
export revenues for Chinese producers.

Income from China's crude exports in January-July fell 24.6% from a year
ago despite a 40.5% jump in barrels flowing out of the country. The country
took in $1.16 billion from its crude exports in the first seven months of this
year, as compared with $1.54 billion in the same 2008 period.

Revenues on a per-barrel basis were down 46.3% to an average $52.47
between January and July, from $97.74 a year earlier.
--Winnie Lee, winnie_lee@platts.com