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New refinery start-ups in China are helping to absorb some of the crude oil from the Middle East amid an otherwise depressed market with stalled demand recovery.
Large private Chinese refiner Zhejiang Petrochemical has been buying millions of barrels of crude from the United Arab Emirates, Qatar, and Iraq in recent days, for delivery in December and January, oil traders told Reuters and Bloomberg.
Rongsheng Petrochemical, the trading arm of Zhejiang Petrochemical, has bought at least 5 million barrels of UAE’s Upper Zakum crude and Qatar’s al-Shaheen crude in a tender this week, trading sources told Reuters. According to traders who spoke to Bloomberg, Rongsheng Petrochemical has purchased at least 7 million barrels of crude from the Middle East.
The company was looking to procure oil from the Middle East as it prepares to begin trial runs at a new refinery by the end of this year, sources told Reuters.
The Chinese purchase is good news for the oil market rebalancing as resurging COVID-19 cases and new restrictions in many countries point to more slowing of the global economic recovery and oil demand recovery through the rest of the year, analysts say.
China’s oil imports in September increased by 2.1 percent month over month to 11.8 million barrels per day (bpd), the first monthly rise in three months as cargoes delayed because of port congestion cleared customs last month.
Chinese refiners went on a buying spree this spring, taking advantage of the lowest crude oil prices in decades in April to snap up cargoes for delivery in the summer months. As a result, China imported record volumes of crude oil in May and June. Yet, the bargain-hunting for dirt cheap oil resulted in queues at Chinese ports with tankers waiting for weeks to discharge crude that had likely been loaded three to four months ago.
Between January and September, China’s crude oil imports increased by 12.7 percent on the year, in the latest positive sign for demand in the world’s top oil importer.
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.