China 2020 Oil Imports: $500BN, 9mmb/d acc. to WoodMac

Opposing trends in China, US crude imports to impact cost, trade flows: WoodMac - Platts |  China is expected to surpass the US as the world's largest oil importer by 2017, and the opposing trend of growing crude oil imports by China and falling imports by the US will affect inter-regional trade flows and the cost to both countries, consultants Wood Mackenzie said Tuesday. According to WoodMac's estimates, China will need to spend $500 billion on oil imports by 2020, while US spending on oil imports will fall to $160 billion by the same year. "By 2020, 70% of China's oil demand will come from imports. On the other hand, US import requirements will reduce due to tight oil production," said William Durbin, WoodMac Beijing-based president of global markets. From 2005 to 2020, China's oil imports will rise from 2.5 million b/d to 9.2 million b/d, while US imports will have fallen from a peak of 10.1 million b/d to 6.8 million b/d within the same period, WoodMac said. That translates to a 360% increase in China's crude oil imports and a 32% decline for the US. "It is important to note these opposing trends as it means the US is becoming more North America-centric for its supply needs and China more dependent on Middle East and OPEC crude," Durbin said, adding that OPEC suppliers, who traditionally focused on the US for crude sales, will be compelled to shift their focus to China. China's growth in import demand can largely be attributed to its domestic oil demand growth, driven by gasoline demand due to the near-exponential increase in personal auto vehicles and diesel demand related to commercial trucking as China's economy grows, WoodMac said.

OPEC SHARE IN CHINA'S IMPORTS SEEN RISING - Given the complexity in China's refining structure and focus on medium-sour crude, China will have to look to OPEC to produce oil products in demand because medium-sour crude is a growing share of future OPEC supply, WoodMac said. As a result, between 2005 and 2020, OPEC's share of Chinese imports is expected to rise from 52% to 66%, it said, adding that the share of non-OPEC imports declined from 48% to 34% to 2012, and will continue to decline to the end of the decade. Comparatively, for the US, OPEC crudes will fall to 33% of US total imports by 2020 while Canadian crudes will account for 60% of US imports. 
CHINA TO PAY HIGHER PRICE RELATIVE TO US - "The high cost to China for crude oil imports is compounded by the fact that China will pay a higher price for the imports relative to the US as the average price is based on a differential to Brent," said Harold York, principal oil market analyst at WoodMac. "China's import crude price tends to be closer to Brent than the US because of growing North America supply options," he said, adding that also, the quality of the Chinese import barrels of medium crude is rising relative to the US. Meanwhile, North American production from tight oil plays is skewed towards light sweet crudes, leaving heavy-sour crudes a growing share of its imports, thus providing North American buyers greater discounts for imports.