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Lunar new year, pollution curbs slow China crude imports

China's February crude oil imports dropped to their lowest level in four months, final data from Thomson Reuters Oil Analytics showed, reflecting a seasonal lull in economic activity over the Lunar New Year and Beijing's clampdown on polluting industries.

The world's second-largest economy imported 22.833 million metric tons of crude in February, according to Oil Analytics. That's the lowest level of shipments since official Chinese customs figures in October showed a drop to 20.41 million metric tons.

Oil strategists contacted by CNBC said the data merely reflected the effect of seasonal distortions though some believed it signaled a deeper economic slowdown. Official data last Saturday showed Chinese manufacturing activity dropped to an eight-month low.

"We expect economic growth will continue to move forward in second gear as the government will focus on how to control credit growth," said Thina Margrethe Saltvedt, senior macro oil analyst at Nordea Markets in Oslo.

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(Read more: Oil unnerved by fears of rising US stockpiles; WTI ends lower)

Still, the government continues to expand and fill strategic oil reserves, a factor that could help support oil demand, Saltvedt said. "We still expect that oil imports will remain fairly high as China still needs to fill its SPRs."

Another demand-negative theme for China's oil imports may be Beijing's environmental policy goals - maximizing energy efficiency, clamping down on polluting industries and shelving new refining capacity in some provinces.

"The Chinese government will continue to prioritize reform over more rapid economic growth in 2014, with energy and environment reforms at the forefront of policymaking," wrote Michal Meidan, senior analyst for Asia at political risk consultancy Eurasia Group.

"In 2014, Beijing will target the main sources of air pollution, specifically oil-intensive industries such as manufacturing and construction," he wrote in a February 24 report. "The net effect of these policy shifts will likely be a gradual decline in oil intensity."

Distortions

February's numbers may be distorted by a seasonal lull in activity owing to the Lunar New Year festival, which began on January 31 and covered early February.

Analysts said they needed to pick through the March numbers to determine whether the February crude oil import decline signaled meaningful economic stress or just the effect of seasonality.

(Read more: Crude prices could do an about-face, and soon)

"I would look at it over a few months' period as January may have been impacted by pre-Chinese New Year buying," said Johannes Benigni, managing director, JBC Energy.

February's China crude imports numbers are down 15 percent from Oil Analytics' January estimate of 26.94 million metric tons, and well below official assessments from China's customs data which reported a record 28.15 million metric tons last month.

"January was likely on the high side as many credit lines tend to get rolled over in the New Year which can amplify January numbers," said Mark Keenan, Cross Commodity Research Strategist at Societe Generale.

Indeed, many cautioned about reading too deeply into the softer crude import figures, saying February provided a shorter-than-usual data snapshot.

Thomson Reuters Oil Analytics has been compiling China crude data for a year now. The assessments of physical crude oil flows are typically finalized by the end of every month. February's final number was released on Monday. Since October, Oil Analytics' estimates have achieved accuracy rates of over 90 percent when compared to official China customs data.

By CNBC's Sri Jegarajah. Follow him on Twitter @cnbcSri

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