Oil through a Chinese looking glass

Asia Unhedged thinks the latest global oil import figures give ample food for thought in gauging the real severity of China’s economic slowdown.

Reuters reported Monday that China overtook the U.S. as the world’s top importer of crude oil for the first time in April. What’s more, the nation’s purchases are expected to remain strong.

Hey! Wasn’t the Chinese economy supposed to be sputtering in what some pundits assert is a prelude to a ominous tailspin? The surprise jump is being attributed to low oil prices and a recent series of interest rate cuts. The latest was made by the People’s Bank of China on Sunday.

All this goes to show that regulatory efforts to boost demand, while not perfect, are having their desired effect. Rather than a passing lift, the drop in world oil prices appears to be combining with monetary and other factors to give China’s economy unexpected strength in the face of more bearish indicators since January. In China’s case, momentum is a hard to brake and even harder to throw into reverse.

Reuters data show that China’s crude oil imports hit a record of almost 7.4 million barrels a day (bpd) last month, putting it ahead of estimated U.S. imports of 7.2 million bpd for April.

The shifting nature of global oil consumption indicates that the U.S. may regain its lead as the world’s top oil importer in coming months. But a longer term geopolitical shift is also occurring where China will permanently replace the U.S. as the world’s No. 1 oil importer. Added to that is the fact that China is already the world’s biggest consumer of energy.

“Overtaking the United States means China is the top user of almost all commodities, including coal, iron ore and most metals, with far-reaching implications for markets which continue to shift from West to East,” Reuters said.