Chinese oil imports from Angola fell nearly 19% in the first quarter of the year, while increasing from Russia and Saudi Arabia, the country´s 2 main suppliers. The reduction of Angola´s exports is putting pressure on its trade balance of goods, according to data from the national bank.
Based on chinese customs data, Reuters estimates China’s March crude oil imports rose 4.5% year on year. A nearly 30% increase of imports from Angola in that month was not sufficient to compensate for the steep fall in the first two months of the year. In the quarter, China bought 10,3 million tons of oil from Angola, 18.7% less than in the same period of 2019.
According to market analysts, China’s March crude oil imports rose as refiners stocked up on cheaper cargoes despite falling domestic fuel demand and cuts in refining rates due to the impact of the COVID-19 pandemic.
Research from Angola´s BFA bank estimates that in 2020 , the fall in the price of oil will take the current account, which has been in surplus, “back to a significant deficit, dragging the balance of payments with it and causing another fall in reserves”. According to the Angolan central bank (BNA), Net International Reserves amounted to USD 10.9Bn in March, practically unchanged from February. According to our calculations, the amount corresponds to approximately 6.3 months of imports.
Recent data from BNA shows the current account had a surplus of USD 5.1 billion (Bn) in 2019, down from USD 7.4 Bn recorded in the previous year. The fall was particularly serious in the trade balance of goods, with the surplus declining by USD 4.3Bn, standing at USD 20.6Bn; the decrease was mainly due to a reduction of USD 6.0Bn (15.3% yoy) in crude oil exports.
On the other hand, imports of goods decreased by USD 1.7Bn (-10.6% yoy): in particular, imports of consumption goods fell sharply (-13.3% yoy). The drop in service imports was even larger, at USD 1.9Bn (-19.0% yoy), with the services balance posting the lowest deficit ever (USD -8.1Bn).
On the capital and financial account side, there was a deficit of USD 4.2Bn, thus resulting in a total surplus of USD 0.9bBn in the balance of payments balance, which was reflected in an increase in reserves in 2019.
According to preliminary data from the Ministry of Finance, in 2019, the Angolan State posted a budget surplus, around AOA 0.6 trillion, about 1.8% of GDP. This is the 2nd consecutive year of a positive balance in the accounts, although lower than the 2.2% of GDP recorded in 2018. The primary balance (which excludes interest expenses) likely stood around AOA 2.1 trillion (6.5% of GDP), also the 2nd year of surplus, and likewise slightly lower than the 7.7% of GDP achieved in 2018.
“In 2020, the fall in oil prices will again put the accounts in the red: the Budget predicted a surplus of around 1.2% of GDP, but the impact of the crisis could cause a budget deficit between 4-5% of GDP”, BFA reserch says.
Last month, international markets recorded a historic drop in the price of WTI, which reached USD -37. The drop occurred in the context of a shortage of storage space, causing WTI delivery contract holders in May to pay to get rid of them. Prices have recovered since then, with Brent now trading at around 28USD.