Four BP-chartered supertankers containing a total of 8 million barrels of oil have been held up off China's east coast over the past two months, in a sign that slower demand from independent refiners may have caught traders off guard, Reuters reported on Friday, citing shipping data and trading and shipping sources.
BP was one of the first Western oil firms to start selling crude oil to China's independent refiners-the so-called teapots-after the small refiners first obtained government-endorsed oil import quotas in 2015. BP regularly ships oil from West Africa to the Shandong province-the home of most of China's independent refiners.
But now demand from the teapots has started to wane due to the higher oil prices and new tax rules that China introduced on March 1. Before that, teapots were known to have used various loopholes in China's tax regime to underpay, underreport, and even evade taxes. But as of March 1, China introduced new tax regulations and reporting mechanisms in a crackdown on the tax evasion practices of independent refiners.
Those new tax regulations have started to stifle the teapots' profit margins and could limit their purchases of crude oil, potentially affecting demand growth in the world's largest crude oil importer. Related: The Demand Downside For Oil Prices
While it is not uncommon for producers and traders to ship oil cargoes before finding buyers, cargoes of the size of the BP-chartered four supertankers being stranded for a period as long as two months is a rarer event, oil traders and shippers told Reuters.
"Either it's because of lower run rates curbing teapots' buying, or the buyers are having problems paying," an executive with a western trading firm said, while an executive at an independent refiner in Shandong said: "The market is bad - weak demand as plants come under policy headwinds ... (with) the tax rules biting into margins."
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
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