Well, Goldman Sachs’ analysts think so. In their latest weekly commodities report, they point out that China’s 1.6m b/d rise in crude imports almost perfectly offsets a 1.5m b/d decline in the same, from the US:
They add (emphasis ours):
Furthermore, recent data on crude loadings suggest that close to 14 mn barrels of West African crude is being redirected from the West to the East. The surging Chinese demand for oil suggests that the drivers of not only consumption growth, but also world oil demand and prices, are shifting from the West to the East.
The IEA hinted at a similar dynamic in its latest monthly oil market report, pointing out that some Saudi Aramco grades were no longer available to European customers at all, in favour of Asian markets and domestic power consumption.
Now, Goldman actually forecast China’s crude oil demand growth rate will slow, but warn of a significant risk that this might not be the case.
The reason they give is that, while there is a perception of financial policy tightening in China due to recent measures – such as higher capital ratio requirements, policy is in fact looser than the second half of 2009. They view the country’s economic policymakers as essentially conservative on export demand growth, and therefore more at risk of not tightening policy adequately than of going too far. This scenario would see crude demand continue to rise rapidly.
Finally, they point out that fears of a medium-term supply squeeze, brought on in part by growing emerging market demand, seems to be creating volatility in long-dated WTI contracts. While volatility levels for short-dated contracts have settled towards historical norms, long-dated contract price volatility has remained high for two years. They state that the same thing happened in 2005 when, in a classic demonstration of price elasticity, Goldman believe it pushed crude demand almost half a million barrels per day lower than GDP growth implied, while also pushing inventories to their highest level since 2001.
Given China’s apparent nervousness about its increasing reliance on imported fuel, we wonder if a big part of that reverse-rebound in demand could come from China itself.