Incentivized by below $80 a barrel Brent oil prices, Chinese refiners are looking to import more crude to build up stocks at relatively low prices early this year, expecting strong demand for fuels in the latter part of 2024, analysts and trading sources told Reuters.
International oil prices and China's crude import quota policies early this year have made refiners more certain of planning their purchases.
Brent Crude has traded below $80 a barrel since early December, having dropped from a 2023 high of $95 at the end of September.
In addition, China also issued early this month a massive batch of crude oil import quotas to refiners for 2024, raising the allowances from early last year by around 60% and allocating full-year quotas to some. The high volumes of import allowances are expected to give independent Chinese refiners better visibility on their plans to purchase crude oil throughout 2024.
So now refiners are looking to stock up on below-$80 crude early in the year in anticipation of a surge in fuel demand in the second half.
"Chinese refiners, led by Unipec, are moving quickly this month," an oil trader at a Chinese refiner told Reuters.
"They snap oil from all over the world, except for the U.S. due to high freight rates."
Higher rates have made U.S. crude more expensive for Asian refiners compared to the crude grades from the Middle Eastern producers.
So Asian buyers are turning to more Middle Eastern crude, especially after Saudi Arabia-the world's top crude oil exporter-slashed the price of its crude for Asia for February loading by $2 per barrel to a premium of $1.50 per barrel over the Oman/Dubai prices, off which Middle Eastern producers price their crude loading for Asia. That's the lowest premium for Saudi crude over Oman/Dubai for 27 months-since November 2021.
It's too early to assess China's oil demand this year, after a mixed bag of economic data throughout last year. But higher Chinese crude oil imports in early 2024, when demand is typically weaker, could support international oil prices.
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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