In order to address concerns over refinery overcapacity at home, China will stop accepting applications by refiners to import crude oil beginning May 5th, the Chinese state planning commission said on Thursday.
The National Development and Reform Commission (NDRC) has not specified if the move was referring to state-held refiners or to independent refiners, also known as teapots. The biggest state-owned refiners such as Sinopec and PetroChina are not part of the oil import limits because they do not have quotas for importing crude oil.
"The policy, which is quite expected, also sends the signal that the government is not going to encourage independent firms to add new crude processing capacities," Harry Liu, oil analyst at IHS Markit, told Reuters.
Since 2015, China has issued permits to 22 independent refiners to import crude oil, with quotas totaling 1.64 million bpd, according to figures by China Petroleum and Chemical Industry Federation (CPCIF) cited by Reuters. The quotas allocated to independents have accounted for 12 percent of China's overall crude imports.
According to Liu, now China's planning authority may have decided to set 2 million bpd quotas to the teapots, and that volume is expected to be reached with the applications that independent refiners have already filed.
In view of the deadline a week from now, there could be a lot of applications for import permits this week and next, according to a manager at an independent refiner who had spoken to Reuters.
"NDRC is pretty cautious in giving more import quotas because they are concerned about the fuel glut in the domestic market," the manager noted.
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According to CPCIF, China's surplus of capacity is expected to rise to 2.2 million bpd by 2020, which would make it Asia's top fuel exporter as it would surpass South Korea and India in terms of export volumes.
With a daily import rate of 9.17 million barrels of crude last month, China broke its own previous record and overtook the U.S. as the largest importer of the commodity globally, both in March and in the year to date.
By Tsvetana Paraskova for Oilprice.com
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