News & Events

Energy Economics Weekly Briefings

Crude Oil Storage In China: Implications for Growth

Written by: Ellen Hughes-Cromwick
  • Orbital Insight uses satellite images of crude oil storage tanks worldwide to estimate volumes on a daily basis.
  • Using these daily data may help to gain insight on whether this is a leading economic indicator for economic activity.
  • There is ample reason to suspect that these data may provide advance signals about changing trends.

Crude oil statistics are collected and published by major government agencies and international organizations. Arguably, these data are may be flawed since they are survey-based and published with a time lag. Commercial satellite imagery has allowed Orbital Insight (OI) to estimate crude oil stored in floating-roof tanks worldwide. Using data science, trigonometry, and machine learning to name just a few tools, OI has developed daily estimates of crude oil in storage worldwide. This weekly briefing will report some key findings for China.

Recently, there has been a marked slowdown in economic activity given the surge in credit market lending. Companies and consumers are overleveraged: total debt in the economy is now over 200% of GDP. Interestingly, OI’s daily data may be hinting at the severity of the slowdown. As economic activity slowed, storage tank volumes have risen to levels not seen in recent years. The first chart shows the running rate of daily volumes in 2017, 2018, and so far this year. These daily estimates are smoothed using a 20-day moving average. The surge in crude oil stocks is substantially higher than the modest stock builds and then drawdowns seen in the two prior years.


The second chart shows the 30-day change in crude oil stocks. The seasonality in the data is quite evident here, but the stock build so far this year stands in contrast to typical early year behavior when the New Year is correlated with a stock drawdown.



Indeed, stocks are building in an economy which is slowing to a 6% real GDP growth rate (see next chart). The energy intensity of China’s economy has improved, suggesting that less oil is need to produce a unit of real GDP. There is an 89% negative correlation between crude oil in storage and real GDP.

China’s Purchasing Managers’ Index (PMI) for Output also correlates with movements in the crude oil stocks (see bottom chart). As a leading indicator for the economy, crude oil stocks track the range bound trends during 2017 and through the first half of 2018. Since mid-2018, both the PMI has dropped, indicating a slowdown in the economy. Crude oil stocks surged, also confirming the weakness which has emerged.

Author’s Note: A nondisclosure agreement has been signed with Orbital Insight in order to obtain access to these data.