Chinese independent refiners have snapped up rare crude grades from the North Sea and Guyana at low prices in an oversupplied market after the coronavirus pandemic destroyed demand, four sources with knowledge of the matter said on Tuesday.
The North Sea grades bought included Balder, Flotta, and Chestnut crude, while Guyana's Liza crude was sold into China for the first time, the sources told Reuters.
"We are seeing these grades for the first time," one of the sources said. "They have no demand in their local markets and have to be sold out of their regions."
Traders are offering a wide variety of crude grades from all over the world into top importer China as its refiners ramp up operations amid a gradual recovery after a near 3-month lockdown to curb the spread of the coronavirus.
The opportunity for these Chinese buyers, commonly known as teapots, to snap up supplies at low prices came as the rest of the world started curbs, sharply reducing fuel demand.
Balder and Liza were sold at spot discounts of $7.30-$7.50 to ICE Brent for July arrival, while Flotta crude was sold at a discount of close to $7.00 to ICE Brent for late June arrival, the sources said. The price for Chestnut crude was not immediately available.
"When new grades enter a market, normally they are being sold cheaply," said the second one of the sources. "These are absolute bargains and absolutely worth buy... It would be a pity not to pick up the cheap barrels."
These low-sulphur grades are also good substitutes to popular ones such as Russia's ESPO crude and Brazil's Lula crude, which were still offered by traders at comparatively higher spot differentials in the China market, the sources said.
Independent refiners collectively account for a fifth of China's crude imports and their purchases are restricted by quotas.
Buyers are now waiting for the second batch of quotas which could be issued in the second half of April, two Chinese refining sources said.
(Reporting by Shu Zhang; Additional reporting by Florence Tan; Editing by Edmund Blair and Peter Graff)
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