- China imported a record amount of U.S. crude in November, according to figures from ClipperData.
- U.S. crude's discount to international benchmark Brent crude is driving the recent surge in shipments.
- U.S. supplies remain a small share of Chinese imports, but American producers are poised to capture some of the country's growing demand.
Chinese crude oil imports hit the second highest level on record last month, and U.S. oil producers are reaping the benefits.
U.S. crude oil imports into China hit an all-time high in November, according to figures from ClipperData. The tanker-tracking firm reports that 289,000 barrels a day of U.S. crude hit Chinese shores by the end of the month.
That is a small share of the 9.01 million barrels a day that China imported in November, but it shows that U.S. producers continue to make inroads into the country two years after Congress lifted a 40-year ban on crude oil exports.
Chinese imports of U.S. crude oil, source: ClipperData
The United States has been able to penetrate the market in part because OPEC, Russia and nine other oil exporters are limiting their production in order to balance an oversupplied market. That has allowed U.S. producers to capture some of China's growing crude oil demand.
But there's a bigger factor at play in recent months, according to Matt Smith, director of commodity research at ClipperData. U.S. crude is trading at a significant discount to international oil prices.
The price difference between U.S. West Texas Intermediate crude and international benchmark expanded this fall after Hurricane Harvey shut down U.S. Gulf Coast refineries. That suppressed the price of WTI, making it attractive to overseas buyers. The Chinese purchases started around that time, according to Smith.
The price spread between WTI and Brent has narrowed since then, but still stands at about $6 a barrel. That helped to drive total U.S. crude oil exports to an all-time high above 2 million barrels a day in October.
U.S. exports to China are "really going to depend on the spread," Smith said. "We're still here at over $5 on the Brent-WTI spread and so as long as that U.S. crude is discounted it will be bought up by Asia or Europe."
Market watchers shouldn't expect to see Chinese imports stay at 9 million barrels a day, but there is more growth on the horizon, said Michal Meidan, head analyst for Asian energy policies and geopolitics at research consultancy Energy Aspects.
Refinery activity in China is healthy, demand is "decent," and refining margins are "phenomenal" thanks to tight supplies of diesel, she says. Meanwhile two new refineries in China are ramping up a combined 460,000 barrels a day of refining capacity and more small, independent "teapot" refineries are opening.
Chinese crude oil imports are up about 900,000 barrels a day to an average of nearly 8.5 million barrels a day through November, according to figures provided by Energy Aspects. Next year, the firm sees that growth slowing down, but it still expects Chinese demand to increase by about 500,000 barrels a day.
"I think the U.S. certainly is poised to capture a lot of that growth," Meidan said. "There is a huge amount of interest in U.S. crude to Asia broadly but to China specifically."
While U.S. crude oil imports are averaging just below 140,000 barrels a day this year, that marks huge growth from about 10,000 barrels a day last year, according to Meidan. She notes that Unipec, the trading unit of Chinese refining giant Sinopec, expects to double its imports of U.S. crude next year.