China has issued its second batch of crude oil import quotas to independent refiners and trading companies for 2018-a much smaller batch, but the low volumes were expected because the first batch was a large one and estimated to cover nearly a year's worth of small refiners' imports.
China's second batch of import quotas has a total volume of 11.91 million tons, Reuters reported on Friday, citing three trade sources who had seen the official documents.
As many as 26 companies were allowed to import crude oil in the second batch, including 21 independent refiners, the so-called teapots, who were first allowed to start importing government-approved quotas of crude oil in 2015.
The first batch of the 2018 import quotas was issued in December last year, when China approved crude oil import quotas for a total of 121.32 million tons for 44 companies. This total volume in the first batch was equal to 2.43 million bpd. Although state-held ChemChina received the single largest quota, several independent refiners saw their import quotas upped in the first batch compared to the allowances for 2017.
Commenting on the second batch of quotas, Sengyick Tee, a Beijing-based consultant at SIA Energy, told Reuters today:
"A much smaller batch of quota was expected as many independent [refiners] already got quota that's equivalent to 11 months of use in the first batch."
Related: The New Oil Cartel Threatening OPEC
Those crude import quotas do not include and do not apply to the major state-owned companies such as Sinopec or PetroChina that don't have restrictions on importing crude oil.
Although most of the Chinese crude oil imports indeed go to the state-held majors, the rise of the independent refiners after they were allowed to import crude oil in 2015 has been a key driver of the oil demand growth in the world's top oil importing country. The purchases by independent refiners have grown to account for around a fifth of China's total crude imports.
But recently, concerns have started to emerge that new tax rules-aimed at clamping down tax evasion at teapots-have started to stifle the independent refiners' profit margins and could limit their purchases of crude, potentially affecting demand growth in the world's largest crude oil importer.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More