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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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A Sign Of Slowing Demand? Chinese Refiners Reach Crude Import Quota

Refinery

China’s independent refiners known as teapots have used up the amount of imported crude that the government allocated to them in January, which means imports are likely to slow down through June, Platts estimates. That’s the month when Beijing will hold a second round of quotas.

The January quotas had 45.64 million metric tons of imported crude distributed among the teapots, most of which has already been processed. This amount is close to that allocated to teapots for the whole of last year: 60 million tons. As a portion of total Chinese crude oil imports, the 2016 quota allocations were equal to 16 percent.

The reason for the premature emptying of the tanks was that the 2017 allocations were based on how much each independent refiner had imported in January-October 2016, so those whose imports were higher in the last two months of the year received a lower quota than they would have liked.

Still, the quota allocation itself is good news: in December, the teapots started worrying that the government might decide to forego the practice. The refiners expected to be asked to submit their applications for an import quota by mid-November, but by early December there was still no news from the National Development and Reform Commission.

At the time, sources from the refining industry said that Bejing may be seeking to clip teapots’ wings as their share in total oil product exports grew at the expense of state-owned giants. This share, however, was relatively small as of the end of 2016, at 2.4 percent. Related: Wall Street Bullish On Oil Prices Despite Saudi Warnings

Earlier this month, the teapots were faced with another problem: Beijing suspended fuel export quotas for the independent refiners at the end of 2016. Teapots got their first fuel export quotas last year, which led to improved crude oil demand in China, positively affecting international prices. However, after the ban, they were limited to the domestic market, which threatened to substantially cut their income as competition intensified.

By Irina Slav for Oilprice.com

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