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Oil Prices Climb On Huge Inventory Draw

China Awards Oil Import Licenses To Four Teapot Refiners

China has agreed to grant crude oil import licenses to four independent refiners. This is the first round of import license awards for independent refiners since May last year, when Beijing granted licenses to a dozen teapots, S&P Global Platts reports. The awarding will take place later this month after a public review.

This latest round of license awards will also raise the total of Chinese refiners granted the right to import crude oil directly to 31 since August 2015. Teapot refiners have been instrumental in the country’s oil demand jump over the last four years, driving up global demand as well and directing oil price predictions from analysts and the oil industry.

To date, independent refiners account for about 30 percent of China’s oil processing capacity, which stands at 15 million barrels daily and rising. According to an analysis from Bloomberg released in March, this year will see refining capacity additions of as much as 890,000 bpd. Almost half of this will come from a new 400,000-bpd refinery property of teapot Hengli Petrochemical Co.—an independent refiner—which began trial runs at the facility five months ago. Full capacity was expected to be reached by the end of May.

Meanwhile, Beijing has been awarding oil product export quotas and these are higher, too: since the start of the year, the quotas have exceeded 50 million tons of oil products. That’s despite an oversupply on the domestic market that has begun seeping into neighboring markets, pushing refiners’ margins lower.

Chinese refining rates hit an all-time high in April, at 12.68 million barrels daily. For the first four months of the year, the daily average stood at 12.62 million bpd. In January this year, CNPC, the country’s largest oil company, saidit expected 12.68 million bpd to be the average processing rate for local refineries this year as a whole.

By Irina Slav for Oilprice.com

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