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China’s Top Oil Trader To Cancel Middle East Crude Imports

Even though OPEC is now flooding the market with cheap oil, Unipec – the trading unit of Asia’s largest refiner, Chinese Sinopec – is attempting to defer or cancel the loading of at least four supertankers from the Middle East in April, due to higher freight rates and expected reduction in processing rates, sources familiar with Unipec’s plans told Bloomberg on Friday.

Middle Eastern producers sell their oil traditionally via long-term contracts with buyers, and in this case, Unipec is looking to get out of buying some crude cargoes loading in April compared to the full volumes it was allocated by producers, Bloomberg’s sources say.

Unipec will be looking to cut at least four supertanker cargoes, each capable of transporting 2 million barrels of oil, to as many as eight cargoes on supertankers, according to Bloomberg. One reason is the higher freight rates, the other reason is that Sinopec plans reduced refinery run rates across its refineries in May because of the still depressed Chinese fuel demand, Bloomberg’s source said.

While the biggest state-held Chinese refiners continue to be cautious about crude purchases and to keep run rates lower than usual, especially because of depressed jet fuel demand, the independent refiners are not only raising their refinery run rates from the very low levels seen in February—those smaller refiners, commonly known as teapots, are also in the market for ordering crude cargoes for May and June arrival at much lower prices, and they have the friends-turned-foes Saudi Arabia and Russia to thank for the cheapest crude in years.

After the collapse of the OPEC+ agreement last week, Saudi Arabia slashed its official selling prices to all regions and is getting ready to flood the market with an extra 2.6 million bpd next month. Russia can boost its oil production by 200,000 bpd to 300,000 bpd in the short term, with a potential for up to a total increase of 500,000 bpd, Russian Energy Minister Alexander Novak said on Tuesday.

By Tsvetana Paraskova for Oilprice.com

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