The question for the market is whether the improvement in crude and product imports in July is a sign that flows are starting to normalise, or whether it is just a blip and Asian markets remain stressed.
The problem is that part of the recovery in imports in July was down to the brief ceasefire from mid-June that allowed tankers that had been stranded by the effective closure of the Strait of Hormuz to exit the waterway.
Asia's imports of light and middle distillates via the strait were 608,000 bpd in July, up from the low of 144,000 bpd in May, but still well below the 1.51 million bpd in the three months to end February.
Crude arrivals in Asia through the strait were 4.05 million bpd in July, up from 1.59 million bpd in April but still 70% below the 13.60 million bpd average in the three months prior to the start of the war.
It's likely that some of the crude and products that exited the Strait of Hormuz during the three-week ceasefire between the United States and Iran will be delivered in August, but after that imports may drop again.
In other words, after August it's likely that Asia's imports will once again be at levels well below what they were prior to the start of the conflict.
This means that Asian countries will have to continue to rely on drawing down inventories and hope that China, the world's biggest crude importer, continues its recent trend of massively curtailing its buying.
China's seaborne crude imports were 6.94 million bpd in July, according to Kpler, up from the decade-low of 5.99 million bpd in June but down 39% from the average of 11.43 million bpd in three months to the end of February.
China's reduction of more than 4 million bpd in seaborne crude imports has largely offset the losses from the Iran war, but the question is how long is this likely to continue.
Certainly, with a crude stockpile estimated to hold at least 1.2 billion barrels, China can keep its imports curtailed for several months, but it would be logical to assume that Beijing won't be keen to deplete inventories substantially.
China could be anticipating, along with a majority of crude market participants, that U.S. President Donald Trump will eventually be forced by economic realities to accept a deal with Iran that reopens the strait on Tehran's terms.
However, the flows of crude and refined products into Asia suggest that the window for such a deal to be reached before real economic hardship is felt is narrowing.
Refined fuel arrivals also improved in July
Imports of refined fuels also showed some recovery in July, with arrivals of light and middle distillates at 5.76 million bpd, according to Kpler data, 18.5% below the 7.07 million bpd average in the three months to February.
While still some way short of returning to pre-war levels, the July imports of crude are well up from April, when flows were most affected by the closure of the Strait of Hormuz, the narrow waterway through which about 20% of the world's oil and products moved prior to the war.
Asia's imports of crude were 18.77 million bpd in April, the lowest since November 2015, according to Kpler data.
June was the low point for imports of light and middle distillates, when arrivals were just 5.21 million bpd, the lowest in Kpler records going back to 2017.
Asia crude imports recover but remain below pre-conflict levels
Asia's crude oil imports climbed to the highest in July since the Iran war started, but were still 15% below pre-conflict levels.
The top-energy consuming continent saw imports of 22.82 million barrels per day in July, according to data compiled by commodity analysts Kpler.
This was down about 4 million bpd from the average of 26.89 million bpd in the three months prior to the U.S. and Israeli attacks on Iran on February 28.
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