Private China Refiners Grab Barrels
(Bloomberg) -- Chinese independent oil refiners returned to the physical crude market in recent weeks, aiding a recovery in Asian demand after a government crackdown on the sector had spurred buyers to scale back activity.
Some private processors including China National Chemical Corp. and Sinochem Hongrun Petrochemical Co. picked up cargoes of Norway’s Johan Sverdrup and Russian ESPO crude for October to December delivery, according to traders. Independents, also known as teapots, have also begun to revive processing rates as maintenance ends and they seek to use up oil-import quotas.
The pick-up in activity by processors in Asia’s largest economy may help to support physical markets that underpin global crude prices after benchmark Brent lost more than 4% in August. Beijing has been probing the independent refiners to bolster compliance with tax obligations and environmental rules.
“It’s about time the teapots come out and start buying again,” said Yuntao Liu, an analyst at London-based Energy Aspects Ltd. September and October are typically peak-demand season for both gasoline and diesel as people drive more during long national holidays and as the harvest season starts, he said.
The possibility of China awarding fresh import quotas by October is also driving refiners to use up any remainders from previous issuance, aiding spot purchases, according to the traders. The independents may get a further 11 million tons of quotas over the rest of the year, EA forecasts, lifting their appetite. Quotas totaling 4.42 million tons were awarded in the latest batch.
Teapots such as Shandong Shouguang Luqing Petrochemical Co. and Dongying Lianhe Petrochemical Co. brought forward restarts by at least four days in August after finishing scheduled work, according to industry consultant SCI99. Processing rates for independents in Shandong rose to 68.46% in the week to Aug. 27, up from 66.98% in the middle of the month, SCI99 data show.
© 2021 Bloomberg L.P.
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