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Chinese Oil Re-Stocking Is Over: Inbound VLCCs Drop To 5-Month Lows

In October 2014, we noted the massive surge (amid a slowing economy) in VLCCs bound for China as they began rebuilding their Strategic Petroleum Reserve, buying the newly low priced crude providing 'artificial' demand not reflective of actual current activity. Crude prices continued to drop and China-bound tankers remained high. But, as Bloomberg notes, this week saw the number of supertankers heading to China drop to 62 - the lowest since September 19th (before China began its restocking efforts) - strongly suggesting that 'artificial demand' has been removed from the global oil market.

 

Oct 2014: 89 VLCCs inbound for China...

 

Feb 20th 2015: 27 VLCCs inbound for China (according to BMAP)

 

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As Bloomberg reports,

The number of supertankers sailing to Chinese ports fell to the lowest in five months in a weekly snapshot of vessel movements compiled by Bloomberg.

 

There were 62 very large crude carriers bound for the Asian country as of about 8:30 a.m. in London on Feb. 20, compared with 63 a week earlier, according to signals from the ships compiled by Bloomberg from IHS Maritime data. That’s the lowest since Sept. 19. The vessels would deliver 124 million barrels of oil, assuming each hauled a standard 2 million-barrel cargo.

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With production hitting record highs, and demand (at 2 million barrels per inbound VLCC dropping) one could be forgiven for thinking crude prices are set to drop further... and perhaps compress Brent-WTI...