Over the last few years, China has been getting more and more dependent on the import of crude oil and some other energy carriers. Most of those oil imports are of Russian origin. the thing is that CHina's domestic oil and natural gas production has been contracting over the last few years while the country's production capacities have increased and are now in high demand of more energy.
In 2019, Russia is planning to increase its import of crude oil and natural gas to China. Even more, Russia is expected to become the primary source of natural gas for China, delivered both through pipelines and in the form of liquefied natural gas.
In the meantime, the Chinese customs service reports that the Russian import of crude oil since the start of 2018 has increased by more than 6% against the same reporting period 12 months before. However, the dynamics started slowing down a couple of months ago, mainly thanks to the fact that some CHinese refineries had cut down on their production due to high oil prices. They say that the market situation has been unstable and the prices have been volatile which is why they are not planning to restore their production capacities until the situation stabilizes.
Like we said, the production of crude oil in China has been going down. At this point, over 60% of China's oil demand relies on import. So, the dependence is still getting stronger despite the deciling demand form CHinese refineries. The Chinese GDP is still growing which means more production and more energy carriers required to sustain this growth.
The Chinese office for national statistics reports an oil production decline by 2,3% in June 2018. At this point, CHina is producting 3,86 million barrels a day. The domestic oil production peaked in 2015 at 4,31 million barrels a day and has been going down ever since.
Apparently, the biggest amounts of crude oil have been imported from Russia - over 1.3 million barrels a day, with over 750K b/d delivered though pipelines. As for Russia, it's now capable to spare more crude oil for China due to lower supplies to Europe.
As for natural gas, Beijing has been accelerating the import from Russia at even greater pace. In June alone, they increased the NG import all the way up to 7,3 million tons, which is +31% year-over-year. This is happening against a stronger demand for natural gas coming from the Chinese industrial production.
It seems like the Chinese authorities want to cut down on the consumption of coal, due to critical environmental situation in certain parts of China. For now, natural gas and crude oil seem to be the only viable options, which makes then load up on these energy carriers.
