Fuel oil imports into China jumped by 40% in July to the highest level in seven months as falling refining margins raised refiners’ interest in lower-cost feedstock and the province of the independent refiners increased tax rebates on imports.
China’s fuel oil imports jumped to about 401,000 barrels per day (bpd) in July, up by 40% compared to the prior month, and up by 42% compared to July last year, according to customs data cited by Reuters.
Chinese fuel oil imports had started recovering in June, following an 18-month low in May. Fuel oil imports in June rose by 7% compared to May, but they were still lower compared to June 2024.
July saw an acceleration of fuel oil imports in China, amid falling crack spreads and refining margins, which made fuel oil more economical to run compared to crude oil.
In addition, the province of Shandong, the key refining hub of China’s independent refiners, in early July raised the tax rebates for the fuel oil imports of six local refiners, in a move to ease the downward pressure on margins and boost economic activity.
The Shandong provincial government has increased the consumption tax rebates to which the refiners, also known as teapots, are entitled for sales of gasoline and diesel refined from imported fuel oil. The tax rebates have now been lifted by 25 percentage points to between 75% and 95%.
The move was expected to ease the pressures on struggling independent refiners and boost industrial activity in the province of Shandong, according to analysts.
Shandong’s private refiners, which are short on crude import quotas or haven’t been allocated such, rely on imports of fuel oil to process it into more valuable fuels for transportation, including diesel and gasoline.
Unlike the state refiners, private refiners in China need to be granted import quotas by the government to be able to import crude to process at their refineries.
By Tsvetana Paraskova for Oilprice.com
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