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China’s crude oil imports drop for first time since 2001

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China’s annual crude oil imports slid 5.4 percent in 2021, dropping for the first time since 2001, as Beijing clamped down on the refining sector to curb excess domestic fuel production while refiners drew down massive inventories.

China has been the global oil demand driver for the last decade and accounted for 44 percent of worldwide growth in oil imports since 2015, when Beijing started issuing import quotas to independent refiners. Benchmark Brent crude oil weakened slightly to $84.40 per barrel in the wake of the data release.

The fall in shipments as the world’s top crude importer, to 512.98 million tonnes (equivalent to 10.26 million barrels per day) from 542.39 million tonnes in the 2020s, was shown in data from the General Administration of Chinese Customs on Friday.

The Reuters news agency last year reported slowing imports into the world’s No. 2 refiner as Beijing scrutinised tax evasion and irregular quota trading among independent refineries and also cut fuel export quotas to restrain crude processing.

December oil arrivals reached 46.14 million tonnes, up nearly 20 percent in the first monthly year-on-year growth since April, as independent refiners rushed to utilise 2021 quotas, customs data showed. The December influx, equivalent to about 10.87 million barrels per day, was the highest daily amount since March.

The drop for 2021 compares with an average annual import growth rate of nearly 10 percent since 2015, according to China customs data.

In 2020, companies went on a massive stock building drive amid the lowest oil prices in decades and a rapid recovery in fuel demand from the early impact of the COVID-19 pandemic. But in 2021, refiners and traders drew down inventories amid higher prices and slower growth in fuel demand.

‘Cool the hype’

“Rising crude prices, a ‘backwardated’ market structure and the government’s overall strategy to cool the hype in the commodities market worked together in driving down last year’s crude oil imports,” said Mia Geng, analyst with consultancy FGE.

In a backwardated market, prompt delivery prices are higher than those in future months, discouraging companies from storing oil.

Liu Yuntao, an analyst with Energy Aspects, estimated 70 to 90 million barrels of crude oil were drawn down from storage throughout last year, including a rare public auction of strategic petroleum reserves in September.

Monthly imports recorded year-on-year declines for eight straight months between April and November, as Beijing probed the irregular trading of import quotas that have resulted in reductions in permits for the independent refiners.

Meanwhile, natural gas imports, including piped gas and liquefied natural gas (LNG), expanded 19.9 percent in 2021 from the previous year to a record of 121.36 million tonnes, the customs data showed.

The growth, accelerating from the previous year’s 5.3 percent increase, was buoyed by robust Chinese LNG purchases, especially in the first half of 2021, that saw the country leapfrog Japan as the world’s largest buyer of the super-chilled fuel.

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BUSINESS

5G Deployment: Nigeria approves Microsoft’s agreement, migration of C-Band services

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The federal government has approved an Enterprise Licensing Agreement for Microsoft products and the clearing up of C-Band Spectrum in order to accelerate the deployment of 5G services in the country.

In a statement, the Ministry of Communications and Digital Economy, on Thursday, said the approval was given during the meeting of the Federal Executive Council (FEC) last Wednesday.

This agreement is part of the federal government’s effort towards keeping the cost of IT projects within sustainable levels, the statement, signed by the Technical Assistant to Pantami, Dr Femi Adeluyi, revealed.

He said the agreement would give the government access to discounted prices and other cost benefits, as well as reduce project duplication across Federal Public Institutions (FPIs).

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Bitcoin posts its worst quarter in more than a decade

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Bitcoin on Thursday posted its worst quarterly loss in more than a decade.

The world’s largest cryptocurrency has lost around 58% of its value in the second quarter of 2022, according to data from CryptoCompare. Bitcoin has fallen from $45,524 at the start of the quarter and was trading just below $19,000 on Thursday, the last day of the three-month period.

This is the worst quarterly performance for bitcoin since the third quarter of 2011 when it lost 68.2% of its value.

Bitcoin is down 39.8% in June and is on pace for the worst month ever dating back to 2010 when it became available on exchanges, Coin Metrics data shows.

Meanwhile, ether is down 69.3% in the second quarter and is on track for its worst quarter on record, dating back to its inception in 2015, according to Coin Metrics data.

Coin collapse, 3AC liquidation
Cryptocurrency prices have come under intense pressure this quarter amid rampant inflation which has caused central banks around the world to raise interest rates and led to a sell-off in risk assets, such as stocks and digital coins.

The crash in prices has also exposed issues with a several cryptocurrency companies and projects, particularly those in the lending space and firms that are highly leveraged.

A number of high profile issues have come to light during the quarter.

In May, the algorithmic stablecoin terraUSD collapsed along with its sister token luna. A stablecoin is a digital currency pegged to a real-world asset. TerraUSD was supposed to be pegged one-to-one with the U.S. dollar. Some stablecoins such as tether are backed by real assets like fiat currencies and government bonds. But terraUSD was governed by an algorithm which effectively failed.

Then In June, crypto lending firm Celsius paused withdrawals for its customers citing “extreme market conditions.”

Meanwhile, cryptocurrency exchange CoinFlex halted withdrawals for customers last week also citing “extreme market conditions.” But the company also claimed long-time crypto investor Roger Ver owes it $47 million after his account went into “negative equity.” Ver has denied that he owes CoinFlex money.

And the liquidity crisis has also hit prominent crypto hedge fund Three Arrows Capital which has fallen into liquidation, CNBC reported on Wednesday.

The latest downturn is being described as a new “crypto winter” and has also impacted growth and hiring at companies. Coinbase and BlockFi announced plans to lay off staff.

How does this cycle compare to the past?
Jacob Joseph, research analyst at CryptoCompare, notes that in the previous boom and bust cycle, bitcoin fell from a peak of $19,871 in the fourth quarter of 2017 to a low of $3,170 in the fourth quarter of 2018, suffering a drawdown of 8%.

Joseph said a similar fall of 82.2% was seen in 2014 when bitcoin fell from a high of $1,239 in the fourth quarter of 2013 to a low of $221 in the second quarter of 2015.

“This suggests that we could be in for a further drawdown period if the current poor macroeconomic conditions continue to persist,” Joseph told CNBC.

Other investors have expressed bearishness. In May, Guggenheim Chief Investment Officer Scott Minerd, said bitcoin could drop to $8,000. At the time, the cryptocurrency was trading at around $30,000, representing a 70% fall.

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European markets set to retreat as caution persists after worst quarter since 2020

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European markets are set to pull back on Friday after suffering their worst quarter since the onset of the Covid-19 pandemic, as inflation and interest rate hikes continue to weigh on sentiment.

Britain’s FTSE 100 is seen around 38 points lower at 7,131, Germany’s DAX is set to fall by around 123 points to 12,661 and France’s CAC 40 is expected to drop by around 54 points to 5,869.

The pan-European Stoxx 600 index closed the second quarter of the year on Thursday down 9% — the worst three-month period since the early stages of the pandemic in 2020 — and was down 16.6% year-to-date.

Global market sentiment remains gloomy as the war in Ukraine shows no sign of abating and inflationary pressures continue to mount, prompting central banks to embark on aggressive monetary policy tightening and exacerbating fears of a global economic slowdown.

Shares in Asia-Pacific were lower overnight with Japan’s Nikkei 225 leading losses in the region, after the Bank of Japan’s quarterly business sentiment survey posted a sharp decline in the April-June period.

However, China’s manufacturing activity expanded at its sharpest rate for 13 months in June, boosted by resurgent output after the easing of Covid-19 lockdown measures.

U.S. stock futures also retreated in early premarket trade after the S&P 500 closed out its worst first-half performance since 1970, dropping 20.6% year-to-date by Thursday’s close.

Back in Europe, Reuters reported Thursday that the European Central Bank will on Friday begin a process of buying bonds from southern European nations, including Italy, Spain, Portugal and Greece. The ECB will reportedly use the proceeds from maturing German, French and Dutch debt, in a bid to cap spreads between their respective borrowing costs.

On the data front, a flash euro zone June inflation reading is due Friday morning, along with manufacturing PMIs from Germany, France, Italy and Spain.

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