Asia's crude oil imports to rebound in November amid SPR uncertainty

Asia's imports of crude oil are likely to have rebounded in November to the highest this year amid pre-winter buying by top consumers and despite widespread disquiet among buying countries over high prices.

Imports by the world's top-consuming region are estimated at 26.35 MMbpd for November by Refinitiv Oil Research, up strongly from October's 22.55 MMbpd.

For most of the year Asia's imports of crude have lagged the prevailing global narrative of a recovery in demand and tight market supply, with these factors applying more to North America and Europe.

However, a rush to secure fuel supplies ahead of the northern winter prompted refiners across Asia to buy more crude for November delivery, with all the major importing countries expected to boost arrivals.

China, the world's biggest crude buyer, is expected to import 10.47 MMbpd in November, up from October's 8.9 MMbpd, which was the lowest since September 2018.

However, there are some factors at play that call into question whether China's resurgent November imports are a flash in the pan or the start of a renewed uptrend.

Imports are likely to have been boosted by the government granting new quotas to some independent refiners, which had to be used by the end of the year.

This led to a flood of buying from the these refiners, especially of Russian ESPO crude, which saw spot premiums for the grade rise to their highest since January 2020.

The premium of ESPO over Dubai crude reached $6.35 a bbl on Nov. 16, having climbed from a recent low of $1.90 on Aug. 17.

However, it has subsequently dropped back to around $4.10 a bbl amid subdued interest from Chinese independents for January-loading cargoes.

Another factor that may affect China's imports in the first quarter of next year is the potential for more oil to be sold from the Strategic Petroleum Reserve (SPR).

Beijing has so far been coy about its plans to join the U.S.-led release of crude stockpiles, saying on Wednesday that it was working on its own release according to its own needs.

By not making a firm commitment to release crude from its SPR, China creates uncertainty in the market over its future import needs, although it's likely that Beijing will take some action as the messaging has been clear that the authorities believe oil prices are too high.

SPR uncertainty

India, Asia's second-biggest crude importer, has committed to release 5 MM bbl from its SPR, which if supplied in the space of a month would amount to about 161,000 bpd, assuming a 31-day month.

That would not make too much difference to India's overall imports, which Refinitiv estimates will rise to 4.41 MMbpd in November from 4.04 MMbpd in October, and the highest since April.

Japan, Asia's third-biggest crude buyer, will release "several hundred thousand kilolitres" from its SPR, with one media outlet saying this will amount to about 4.2 MM bbl, a figure that isn't quite two days of demand.

Japan's November imports are on track to reach 3.04 MMbpd, up from 2.54 MMbpd in October and the highest since March 2020.

South Korea, Asia's fourth-biggest crude importer, will also join the U.S. initiative, but has yet to confirm the amount of oil it will release from reserves.

Its November imports are estimated at 2.95 MMbpd, a 22-month high and up from 2.70 MMbpd in October.

Overall, Asia's crude oil imports in November reflect stronger demand ahead of winter and an ongoing recovery from the worst of the coronavirus pandemic.

The unknown factor is just how much oil will be released from the SPRs of the region's top importers, and over what timeframe.

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