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A 2-million-barrel crude oil cargo for an independent Chinese refiner in Shandong has finally been fully unloaded after two months spent at the port of Qingdao, Reuters reports, adding that while some of the oil was unloaded back in May when the Mercury Hope supertanker arrived at Qingdao, the remainder stayed in the tanker because of a slowdown in demand from the teapot refiners in the region.
The Mercury Hope was only one of four BP supertankers that had to sit idle in Chinese waters recently, waiting for more favorable demand conditions to offload their cargo. Two of the cargos were bought by one of the largest independent refiners in China, Qingyuan Group.
Qingyuan Group has a 104,000-bpd refinery in Shandong, the heartland of the Chinese teapot industry, and is the largest independent Chinese lubricants producer. Beijing has provided the company with a crude oil import quota of 4.04 million tonnes for both 2017 and 2018. Still, the fact that even with such a large quota, the company waited before it bought BP’s cargo suggests that teapot demand, which was the main driver of the surge in Chinese crude oil imports over the last two years, is slacking off.
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There is more than one reason for this slowdown in demand. Bloomberg reported earlier this week that the independent Chinese refiners are suffering the combined effects of a tax regime overhaul, higher oil prices, and a lower yuan, plus banks tightening their credit policy. One independent refiner already filed for bankruptcy because of the credit crunch and more might follow as they slip into the red under the combined weight of these factors.
The news should be worrying for oil exporters that rely on China as their main client. Pressured by banks and taxmen, the teapots are buying less crude. Yet some local analysts believe this could change in the current quarter as several large refineries are scheduled to start operation.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.