After several months of slowdowns in spot market oil cargo buys, Chinese importers are once again boosting their purchases, Reuters reports, citing traders and analysts.
Lockdowns in response to the latest resurgence of Covid-19 were one reason for the slowdown in Chinese spot market oil purchases. Another was a shortage of import quotas as the government clamped down on independent refiners.
Now, however, lockdowns are being eased as the spread of the coronavirus appears to be contained. Regarding the government's displeasure with independent refiners, Reuters reports that traders are hoping investigations launched into the operations of teapots will soon be completed as will the crackdown on import quota resales by state-owned energy companies.
Beijing set its sights on independent refiners—the so-called teapots—earlier this year amid a growing glut in fuel output that was eating into refiners' margins. The government banned state-owned energy majors from reselling their import quotas to teapots and launched investigations into environmental compliance and tax issues.
Independent refiners account for a quarter of China's refining capacity, which in June hit a new high in run rates, at 14.8 million bpd. This, however, was lower than the average daily run rates for the first half of the year, which stood at 15.13 million bpd, according to data from the Chinese customs authority released in July.
The offensive against these refiners may be about to end soon. "Chinese majors' crude stocks are very low, and once the government wraps up inspections and finalises punishments, teapots will once again import crude," Energy Aspects said in a note earlier this month, as quoted by Reuters.
Another batch of oil import quotas is expected to be issued next month or in October, which would mean a further increase in cargos going into China and, consequently, higher prices bar any bearish event occurring in the meantime.
By Irina Slav for Oilprice.com
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China’s crude oil imports this year are projected to average 12.50 million barrels a day (mbd) or 7.1% higher than the record-breaking average of 11.67 mbd in 2020.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London