Chinese private refiners are buying Middle Eastern crude on the spot market amid falling prices, Bloomberg reported today, citing two purchases of Saudi and Emirati crude.
According to the report, one teapot refiner, Rongsheng Petrochemical Co. bought a cargo of Saudi crude for prompt delivery this month, and another, Shengdong petrochemical Group Co. snapped up an Emirati Upper Zakum crude cargo. A third private refiner from China bought a cargo of Iraqi Basrah crude for delivery next month, unnamed trading sources told the publication.
The purchases come amid a sharp oil price drop on reports that tanker traffic in the Strait of Hormuz is recovering and Gulf oil producers are ramping up production on the prospect of an end to the war between the United States and Iran.
Earlier in the year, Chinese refiners—both state-owned and private—slashed their overseas buying as benchmark prices surged towards $100 per barrel, dipping into inventories instead. They also cut processing rates, with teapots cutting these rates to the lowest since 2017 last month as high feedstock prices, weak domestic fuel consumption, and restricted exports hurt margins.
In May, Chinese refiners reduced their run rates to the lowest in four years as crude imports slumped to an eight-year low. The average run rate for Chinese refineries in May stood at 66.3%, with total volumes processed over the month down by 9.1% on the year to 53.72 million tons.
Meanwhile, the government in Beijing has started relaxing restrictions on fuel exports, introduced earlier in the year to ensure supply for the domestic market. In late June, the authorities told state-owned refiners they were allowed to export up to 800,000 tons of refined products this month, up from an estimated 600,000 tons exported in June. The allowed shipments in July would be 40% lower compared to the same month last year, according to Reuters estimates.
By Charles Kennedy for Oilprice.com
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