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China Grants Export License To Teapot Refiners

The Chinese government is set to allow some independent refiners to export oil products in 2020, but it will likely keep next year’s overall oil product exports flat compared to this year, S&P Global Platts reported on Monday, quoting sources from the industry.

Several independent refiners are expected to be granted quotas to export oil products in 2020, although not necessarily in the first batch expected to be issued later this week, according to S&P Global Platts’ sources.

Giving independent refiners—commonly referred to as ‘teapots’—export quotas would mean that China would put its state-held giant refiners and the independents in direct competition on the overseas markets.

Large new independent refineries with export capabilities including access to pipelines and ports are the frontrunners to be awarded export quotas at some point in 2020, industry officials and sources at refineries told Platts. 

Hengli Petrochemical had a new refinery start up earlier this year and ramped up to full 400,000-bpd capacity at the end of May. Another 400,000-bpd refinery, of Zhejiang Petrochemical, also began operations in 2019, further pushing Chinese demand for crude oil.

China would likely give those two large private refiners quotas to export oil products rather than award export quotas to smaller landlocked refineries, an independent refiner in the Shandong province told Platts.

Despite the likelihood of granting quotas to independents, China will not be dramatically changing the overall volume of allowed exports in 2020, one of Platts sources said.

China’s exports of refined oil products surged by 63.5 percent in November, when the country’s crude oil imports hit a new record high as refiners rushed to use up their import quotas for the year.

Between January and November, exports of oil products from China rose by 14.2 percent, according to data from the General Administration of Customs, as carried by Reuters. Soaring Chinese exports of oil products have already created a fuel glut in Asia. 

By Tsvetana Paraskova for Oilprice.com

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