China’s crude oil demand has picked up this month, as independent refiners are looking to buy more crude for March and April delivery to restock supplies while oil prices are still relatively low, Reuters reported on Monday, quoting trade sources.
Independent refiners—commonly known as teapots—contributed a lot to China’s 30-percent jump in crude oil imports in December compared to a year earlier. The surge was the result of independent refiners rushing to exhaust their import quotas before the end of last year. This pushed the daily rate of shipments into China to 10.31 million bpd. That was the second month in a row when Chinese refiners imported more than 10 million bpd of crude oil, Reuters notes, with the December figure slightly below the record-high November import rate.
Independent refiners then slowed down purchases for crude oil delivery for January and February, because Chinese demand for fuel is generally lower during the Lunar New Year holiday, which this year falls next week.
In recent weeks, however, teapots have started to buy more crude that will arrive in China in March and April, which has pushed up spot premiums for the independent refiners’ favorite crude grades from Russia, Oman, Africa, and Europe to between $0.50 and $1 higher than quotes from early January, according to Reuters’ trade sources.
“It’s as if someone lit a match and the market’s caught fire,” one source told Reuters, but the sources noted that demand would cool by the end of this week—the week before the week-long Lunar New Year holiday in China.
Last year, China’s crude oil refineries processed an average 12.07 million bpd, up by 6.8 percent on the year and the highest daily processing rate on record. The run rates of Chinese refineries are seen to continue rising this year as well, Reuters reported last week, citing forecasts from the research division of state oil and gas giant CNPC. CNPC’s analysts expect run rates at 4.7 percent higher than the 2018 average, at 12.68 million bpd.
By Tsvetana Paraskova for Oilprice.com
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