The trading arms of some of China’s biggest state-owned oil giants have started selling crude for May loadings in a rare move from the majors that have cut refinery rates in response to soaring oil prices and constrained crude supply from the Middle East.
Sinopec, the world’s biggest refiner by capacity, and Sinochem Group have already sold crude grades from Nigeria and Ghana, mostly to refiners in Asia, including Indonesia and Taiwan, anonymous traders with knowledge of the deals told Bloomberg on Wednesday.
The state refiners in China and many other refiners across Asia have slashed processing rates as their key source of supply, the oil producers in the Middle East, found themselves unable to move most of their crude to the markets due to the closure of the Strait of Hormuz.
Many Asian countries, including China, also rushed last month to ban fuel exports to protect domestic supply.
As early as mid-March, Sinopec reduced its run rates by 10% in response to the supply squeeze resulting from the traffic disruption in the Strait of Hormuz. The size of the cut is equal to about half a million barrels daily. There will also be additional output losses from maintenance operations.
On the other hand, Chinese authorities have reportedly ordered private refiners to maintain high levels of gasoline and diesel supply, even at a loss, or risk their crude import quotas being slashed if they reduce run rates. If the private refiners move to cut processing rates to preserve margins amid soaring crude prices, they would see their import quotas – handed out by the government in quarterly or semi-annual installments – reduced in the coming years, the officials warned.
Meanwhile, China’s refinery runs continued to slip, and state refiners last week operated at below 70% of capacity last week, the lowest level since June 2022, Bloomberg notes, citing data from Mysteel Oilchem.
By Tsvetana Paraskova for Oilprice.com
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