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Chinese teapot refineries imported 5.7 percent less crude oil in August than in July, a survey by S&P Global Platts has revealed, reinforcing a growing worry that a tax regime overhaul will affect Chinese crude oil demand negatively. On an annual basis, S&P Global Platts said, the August import figure was 12 percent lower.
The research company noted the lower import rates were related to a more active typhoon season in China, which forced a suspension of berthings for two weeks. "Typhoons hit Qingdao port four times in August, and vessels could not call at the berths for almost half a month," a source from one of the busiest Chinese ports told S&P Global Platts. This went against expectations for higher imports following refinery maintenance.
Yet teapot refiners have been having other problems since March, when Beijing tightened tax collection controls, closing loopholes that let the independent refiners make bigger profits. Now cash flows have slimmed, and as another source from Qingdao told S&P Global Platts, some refiners have had to delay the offloading of cargoes they had ordered earlier.
As of the end of August, independent refiners had used up 49 percent of their annual crude import quotas and now have the right to import another 61.59 million tons of crude until the end of the year. Whether or not they will fill these quotas remains to be seen as their financial position changes and amid the ongoing U.S.-China trade conflict that has also had the market worried about the future of Chinese oil demand.
OPEC is particularly worried about this as China is among their biggest buyers. Two OPEC oil ministers earlier this week told CNBC that the combination of a trade spat between Beijing and Washington, and a stronger dollar, could dampen Chinese oil demand in the near term. Other factors that will probably contribute to such a development are the shift to natural gas and gains in freight transportation efficiency, according to Wood Mackenzie.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.