Chinese Oil Demand Rebounds

By Florence Tan
Monday, January 28, 2019

Chinese demand for crude oil is rebounding as independent refiners push to buy before prices climb further from low levels hit late last year, restocking with supplies that will arrive in March and April, trade sources said.

That appetite from such refiners, often known as 'teapots', has driven up spot premiums for oil from Africa, Europe, Russia and Oman, the sources said, with prices for some grades hitting multi-month highs.

That comes after teapots slowed crude purchases for delivery in the first two months of 2019 as demand for the fuel they churn out typically fades over the Lunar New Year holidays, which this year fall in early February.

"It's as if someone lit a match and the market's caught fire," said one of the sources. All sources declined to be named as they were not authorised to speak to media.

Global benchmark Brent oil prices had fallen more than 30 percent to just above $50 a barrel by the end of 2018, but prompt May crude futures have rebounded to above $60 a barrel this month.

Teapots tend to time their crude purchases based on oil price movements, and often when one buys others will follow, the sources said.

Spot premiums for crude grades popular with Chinese buyers are between 50 cents and more than $1 a barrel higher than price quotes seen at the start of the month, they said.

For example, Oman's spot premium almost doubled last week to $1 a barrel from the start of the month, while offers of Russian ESPO crude for delivery to China in March have risen by 50 cents to about $3.20 a barrel to May ICE Brent futures, according to the sources and Reuters data.

However, demand is expected to cool by the end of this week as would-be buyers leave the office for the week-long Lunar New Year break, the sources said.

China's refined product consumption could only see 0.5-percent growth in 2019 from last year as gasoline demand slows with an expected 5-percent drop in passenger vehicle sales, while diesel use will continue to contract on weaker industrial output, Lin Chen, Nomura's head of greater China energy global markets research, said in a note.

Still, the world's biggest oil importer could see crude imports rising to 9.5 million barrels per day (bpd) in 2019, up more than 4 percent from the previous year, Chen said.

China's refining throughput is set to hit another all-time high of 12.7 million bpd in 2019, about 600,000 bpd more than last year, driven by new refineries Hengli Petrochemical and Zhejiang Petrochemical, he added.

Competition from these new plants means that other independent refiners are unlikely to increase their throughput this year, Chen said.

Also, oil imports in the key refining region of Shandong in the east of the country are unlikely to rise until Dongjiakou city completes a port expansion by year-end, he said.


(Reporting by Florence Tan; Editing by Joseph Radford)

Categories: Oil Asia

Related Stories

One Shelf Drilling Rig Up for New Job in India, Other for Disposal

PTTEP Hires Velesto’s Jack-Up Rig for Drilling Campaign off Malaysia

Thailand's PTT to Buy LNG from Glenfarne's Alaska LNG Project

Petronas Expands Suriname Portfolio with Deepwater Block Acquisition

Woodside Agrees Long-Term LNG Supply with Petronas Unit

Wood JV Gets EPC Job for Shell off Brunei

Chuditch Gas Field Drilling Ops Get Delayed to Next Year

French Oil Major Acquires Interests in Multiple Blocks in Southeast Asia

ABL Lands Work on BP’s Indonesian Gas and CCUS Project

CDWE Wraps Up Pin Pile Installation Job for Taiwanese Offshore Wind Farm

Current News

One Shelf Drilling Rig Up for New Job in India, Other for Disposal

Four Jack-Up Drilling Rig Deals Set to Bring In $129M for Borr Drilling

PTTEP Hires Velesto’s Jack-Up Rig for Drilling Campaign off Malaysia

Yinson Production Secures $1.17B Refinancing for FPSO Maria Quitéria

Centrica and Thailand’s PTT Ink Long-Term LNG Supply Deal

Petrovietnam, Partners Sign PSC for Block Off Vietnam

Japan Protests China’s New Oil and Gas Construction Activities in East China Sea

CNOOC Signs Hydrocarbons Exploration and Production Deal with Kazakhstan

Thailand's PTT to Buy LNG from Glenfarne's Alaska LNG Project

Woodside and Jera Agree LNG Cargoes Supply for Japan’s Winter Period

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com