Supply/Demand Balance

This chapter discusses crude production analysis and demand analysis of refined products to formulate crude oil balance and petroleum product balances. The main focus of the chapter is to arrive at a characterization of the overall oil market outlook. The chapter begins with an overview of the import/export picture. Then the changes in crude supply and crude demand are compared to derive China's crude import requirements over the next decade. Changes in petroleum product supply and demand are also analyzed to project China's need to import or ability to export value-added refined products. China's oil market is changing, and this has dramatically shaped crude and petroleum product balances. During the past five years, imports of crude and refined products have increased rapidly, while exports of crude and refined products have declined every year. When its crude imports exceeded crude exports in 1996, China became a net crude oil importer for the first time in almost three decades. There are four major changes that have characterized China's oil imports and exports during the past two decades: (1) the vigorous efforts of China to diversify its total exports away from oil-based goods to non-oil items, (2) the change in the composition of oil exports shifting the dependence solely on crude oil exports to a greater proportion of finished or semi-finished products, (3) the shifting of the oil import pattern from primarily heavy products to primarily light products, and (4) the increased export of crude barrels into southern China from Indonesia and the Middle East.