Beijing has cut the crude oil import quotas for independent refiners for the rest of the year in the latest move to curb their growing oil market clout, Reuters has reported, citing industry sources.
According to the report, the latest crude import quotas for independents is 14.89 million tons. This brings the total for the year to 177.14 million tons, which compares with 184.55 million tons for 2020.
This would normally be strongly bearish news for oil. But there is so much going on for the bulls it's likely that the effect of what amounts to a future decline in Chinese oil imports will be temporary.
A total of 16 independent refiners were granted import quotas, with the largest awarded to Hengli Petrochemical. However, the largest private refinery operator, Zhejiang Petrochemical Co, was not granted an import quota for its 800,000-bpd facility.
China's crude oil imports over the first nine months of the year fell by 6.8 percent from the same period of 2020, with September imports alone dropping by more than 15 percent from a year earlier.
Beijing's crackdown on the private refining industry was one reason behind this import decline as the government tackled excessive fuel supply, much of which came from teapots. Allegations of environmental law violations and tax evasion were also leveled against some independent refiners. Additionally, Beijing ordered state-owned refiners to stop trading their import quotas with private peers.
As it tackles teapots, however, Beijing is having trouble securing enough energy supplies for the winter amid soaring gas and coal prices. Orders for boosting domestic coal production have been issued, and China is also ramping up its gas supplies. It is also changing its list of priorities, with decarbonization getting trumped by energy security.
"Energy security should be the premise on which a modern energy system is built, and the capacity for energy self-supply should be enhanced," Premier Li Keqiang said in a statement earlier this week.
By Irina Slav for Oilprice.com
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Still, I project that China’s crude oil imports will average 12.0-12.5 million barrels a day (mbd) in 2021.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London