Goldman Sachs Expects China's Crude Imports to Remain Subdued Amid High Prices

China’s crude oil imports are expected to remain at reduced levels in the coming months if prices stay high, according to a new analysis from Goldman Sachs. The bank's forecast challenges the prevailing market view that anticipates a sharp rebound in Chinese demand, suggesting instead a more muted outlook.

Over the past six months, China has significantly curtailed its crude imports, a move that has helped stabilize the global oil market. The country has increasingly turned to alternative energy sources, including power and coal, as well as its own existing crude inventories to meet its needs, Goldman Sachs noted.

Import Levels and Forecast

While seaborne Chinese crude net imports did rise by 6% in September compared to August, they remain nearly 3 million barrels per day (bpd) below normal seasonal levels, the report stated. Goldman Sachs employed two analytical methods to project future import volumes.

• A model based on crude and product balances projects a modest increase in total crude imports of just 0.6 million bpd in the fourth quarter compared to the third.
• A separate statistical model indicates a small pickup in September imports, but a return to lower August levels in October.

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The bank attributes the slight projected Q4 rise to an increase in refined product exports and a slower drawdown of domestic product stocks, noting that gasoline and diesel inventories are at their lowest levels since mid-2019.

Shifting Supply and Market Impact

The composition of China's imports has also shifted. The share of Russian and Iranian crude fell from half of total imports in August to less than one-third in September. According to Goldman Sachs, this pivot toward non-sanctioned supply has increased demand for openly traded crude benchmarks.

Goldman Sachs estimates that a 1 million bpd change in China’s net crude imports over a six-month period affects the fair value of Brent crude by approximately $4 per barrel. The bank maintains that the primary upside risk to its oil price forecast is not a surge in Chinese demand, but rather a potential escalation of strikes on Middle East production and export infrastructure.