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China's Weak Crude Demand Helps Balance Global Oil Market, Kpler Says

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China's seaborne crude imports dropped 4.7 million barrels per day from pre-Iran conflict levels through May, Kpler said in a Tuesday note.

Kpler said weaker household demand and slowing industrial activity increased pressure on China's energy sector as the closure of the Strait of Hormuz neared the three-month mark.

Real retail sales declined 1% over the year in April after rising 1.6% in Q1, while industrial production growth slowed to 4.1% from a 6% first-quarter average, the note said.

Despite weaker domestic demand, Chinese exports climbed nearly 14% over the year in April after rising 14.5% during the first quarter, reflecting China's continued dependence on overseas markets.

Kpler said higher energy prices and supply disruptions remain key reasons China would prefer the Iran conflict to end and Strait of Hormuz flows to resume normally.

China's net exports narrowed to $85 billion in April, down $11 billion from a year earlier, though Kpler said higher semiconductor imports tied to artificial intelligence infrastructure drove much of the decline.

Kpler expects China's goods trade surplus to remain near a record $1.2 trillion this year, warning that the narrower trade surplus does not indicate a shift toward consumption-led economic growth.

Chinese seaborne crude arrivals are tracking near 7 million barrels per day in May, down 1.4 million barrels per day from April levels, according to Kpler estimates.

Kpler projected Chinese refinery runs at 13.4 million barrels per day in May, down 2.3 million barrels per day from levels seen before the Iran conflict disrupted regional oil flows.

China is helping to balance the global oil market by limiting crude imports even as fuel exports remain weak, Kpler said.

Jet fuel, diesel and gasoline exports averaged only 126,000 barrels per day in May, down from 217,000 b/d in April and 625,000 b/d before the Iran conflict, according to the note.

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