China Boosts Oil Imports as Covid-Zero Restrictions Are Lifted

In a sign of its continued move away from its Covid-Zero policy, China has issued a generous quota for crude imports that is set to fuel an increase in output from the country's independent refiners. The latest batch of allowances will provide 44 non-state-owned refiners and traders with permission to import 111.82 million metric tons of crude oil over several quotas issued annually. With these new quotas, China is continuing its efforts to support its domestic refining industry as it moves further away from the restrictions placed upon it as part of its response to the pandemic.

China took another major step in its 2023 recovery from the coronavirus pandemic with the issuance of an additional 132 million tons of crude oil import quotas for the year 2023. The combined quota for both non-state-owned refiners and traders is significantly higher than the 109 million tons issued around this time last year 2022.

With Covid-19 infections on the decline and mobility increasing across bigger cities, analysts predict that domestic demand for crude oil will also see meaningful growth this second quarter. Refiners may be able to take advantage of these higher quotas by increasing their output to meet energy needs. The oil market is closely scrutinizing China's return to full strength, though futures activity has been somewhat sluggish due to a variety of factors including thin trading and supply surplus concerns as well as fear that a global recession could soon be on its way.

The latest import-quota batch saw Zhejiang Petroleum & Chemical Co. receiving the largest volume of 20 million tons, while Hengli Petrochemical Co. and Shenghong Group respectively received 14 million tons and 8 million tons. This means that independent refiners have been allocated up to 70% of their allowance for the year as indicated by traders consulted on the matter who asked to remain anonymous due to company policy. With these quotas in place, China could soon witness a rebound in their domestic refining industry alongside ongoing recovery efforts from its Covid-Zero restrictions that were implemented last year.