China's Crude Imports to Grow Marginally; Geopolitical Tensions and Tariff Impacts on Oil Markets

Key Highlights

1. Crude Oil Prices: Brent traded at $79.36 (+0.09%) and WTI at $75.84 (+0.01%), with Indian futures rising slightly on MCX.
2. China's Crude Demand: Marginal growth of 1% predicted for 2025 imports, influenced by electrification and slower economic growth.
3. Market Dynamics: U.S. tariff threats, particularly on China, and Trump’s plans for increased domestic production add volatility.
4. Supply Constraints: U.S. Gulf Coast winter storms cut North Dakota oil production by up to 160,000 barrels/day.

Crude Oil Price Trends: Steady Amid Geopolitical Tensions

• Crude oil futures traded flat on Wednesday after the US President, Donald Trump, hinted at imposing a 10 per cent tariff on China.
• At 9.58 am on Wednesday, March Brent oil futures were at $79.36, up by 0.09 per cent, and March crude oil futures on WTI (West Texas Intermediate) were at $75.84, up by 0.01 per cent. 
• February crude oil futures were trading at ₹6577 on Multi Commodity Exchange (MCX) during the initial hour of trading on Wednesday against the previous close of ₹6564, up by 0.20 per cent, and March futures were trading at ₹6540 against the previous close of ₹6513, up by 0.41 per cent.

Demand & Supply Dynamics: China Nears Peak Crude Oil Imports

• The world's second-largest refining industry is estimated to import 559 million metric tons of crude oil this year, CNPC's Economics and Technology Research Institute (ETRI) said on Tuesday, a level equivalent to about 11.18 million barrels per day.
• China's crude oil imports will likely rise only 1% this year, and the country's reliance on oil imports is projected to remain at around 70% between 2026 and 2030, according to an outlook released by state energy giant China National Petroleum Corp (CNPC).
• The world's second-largest refining industry is estimated to import 559 million metric tons of crude oil this year, CNPC's Economics and Technology Research Institute (ETRI) said on Tuesday, a level equivalent to about 11.18 million barrels per day.
• The projected marginal increase is in line with analyst views that demand from the world's top crude oil buyer is near a peak after a rare fall in 2024 because of rapid vehicle electrification and flagging economic growth.
• By 2030, the share of new energy vehicles and heavy-duty trucks fuelled by natural gas will likely increase to 30% and 15%, respectively of their total fleet, according to a CNPC forecast, up from the current level of under 10% for both.
• These changes are set to slash transportation fuel consumption by a fifth, or 80 million tons, from the 2024 level to 310 million tons in 2030, the group estimated.

Petroleum News: Geopolitical Developments and Tariff Impacts on Oil Markets

• The Brent crude oil price recently touched the resistance zone between $80.90 - $81.89 per barrel after a sharp rise since December.
• For a confirmed breakout from this sideways trading pattern and a move towards the $90 region, the price would need to rise and close above the mid-August high of $81.89.
• While the United States (US) plan to impose a 25% tariff on imports from Canada and Mexico by 1 February is positive for oil prices, President Trump’s announcement of boosting US oil and gas production by declaring a national emergency adds downward pressure on prices.
• On Tuesday, Trump revealed that his team was considering imposing a 10% tariff on China, effective February 1, citing the export of fentanyl from China to Mexico and Canada as the primary reason. In response, Chinese Vice Premier Ding Xuexiang, speaking at the World Economic Forum, emphasized that there are no winners in a trade war and called for stronger international economic cooperation
• China, a major global consumer of crude oil, could be affected by such US actions, potentially impacting crude oil demand. Additionally, Trump previously announced plans to impose 25% tariffs on imports from Canada and Mexico, also starting February 1.

Expert Opinion: Electrification, Fuel Demand, and Tariff Uncertainty

• Trump has reiterated his threats to impose a 25 per cent tariff on imports from Canada and Mexico, potentially by 1 February. Overnight, he also threatened 10 per cent tariffs on China in retaliation to fentanyl flows from the country, which has kept some pressure on oil prices in early morning trading in Asia on Wednesday, they said, adding, trade and tariff risks and the potential for retaliation are growing.
• Meanwhile, the US crude oil production was impacted by a winter storm across the US Gulf Coast on Tuesday. Market reports said North Dakota’s oil production declined by 130,000 to 160,000 barrels per day due to the winter storm.