CHINA DATA: Independent refineries cut bitumen blend imports by 30% in March

Chinese independent refineries' bitumen blend imports fell on the month in March, but the intake is likely to find support from mid-April once the sanctions on Venezuelan crude imports expire, sources told S&P Global Commodity Insights on April 12.

In March, around 500,000 mt (3.18 million barrels) of bitumen blend were imported by independent refineries, down by 29.9% from a month earlier, according to data collected by S&P Global.

Those bitumen blend volumes were Venezuelan crudes that were reported as bitumen blend to customs, a practice that has been in place since the sanctions were imposed.

In the first three months of the year, 2.21 million mt (14 million barrels) of those Venezuelan crudes were imported, down by 51.1% from a year earlier, S&P Global data showed.

This was due mainly to weak demand for asphalt, which is used for paving roads, sources said. Venezuelan Merey has been a perfect feedstock for producing asphalt.

Venezuelan Merey crude was being offered at a discount of around $10-$12/b against ICE Brent futures on a DES basis, slightly lower than a discount of $8-$9/b a month earlier, according to sources.

"The price of the barrels [will] fall amid the expectation of the resumption of the sanctions on Venezuelan oil after April 18. If so, China's independent refineries will likely be the sole buyers of those crudes," said a trade source.

However, it's possible that the sanctions are not fully imposed for another few months, some sources said.

China's independent refineries have been the main buyers of those Venezuelan cargoes ever since the sanctions were put in place in October 2019, and only a few state-owned oil companies stepped in to purchase the grade after the sanctions eased.

Guangdong gets 2nd Venezuelan cargo

PetroChina's Guangdong Petrochemical received its second Venezuelan crude cargo this week, right before the sanction relief expires in mid-April, according to shipping data from S&P Global Commodities at Sea.

The Panama-flagged 299,031-dwt VLCC Awin, which departed from Jose export terminal in Venezuela on Feb. 8, discharged 1.288 million barrels (196,000 mt) of Merey crudes into Jieyang port on April 11, according to shipping data.

This was the second crude cargo imported by the company since its commercial operations started in February 2023. The company has been designed to process heavy crudes.

No other cargoes would arrive at the refinery in the short term, according to a source with knowledge of the matter.

China's state-owned refineries typically avoid importing Venezuelan crudes, which have been sanctioned since October 2019. However, the Biden administration partially eased sanctions on Venezuela's oil and mining sector on Oct. 18 for six months till April 18.

Expensive Canadian crude

Apart from Venezuelan crude, independent refineries have also been showing interest in buying heavy Canadian crude once Canada's Trans Mountain Expansion pipeline starts in the second quarter, should economics remain viable.

Several traders said Canadian crudes can be declared as bitumen blend if the specifications meet the standard, to avoid using crude import quotas, though the move will attract an additional 8% import tax and Yuan 1.20/liter of consumption tax.

Customs may require a material declared as bitumen blend to have a penetration index below 400, density above 0.95 kg/cu m and more than 60% of distillation residual at 360 degree Celsius, according to a draft seen by S&P Global.

But those crudes, which were offered at a discount of around $4/b to ICE Brent futures, were more expensive than Venezuelan Merey crude, which makes them not that competitive, sources said.

"Under the current price, there might not be much buying interest for those Canadian crudes from independent refineries," said another trade source.

Prior to this, China's Sinochem bought an Aframax cargo of high TAN, heavy sour Access Western Blend from Canada's Suncor Energy at the equivalent discount of $5-$5.50/b to ICE August Brent futures on a delivered basis, which once shipped would be one of the first cargoes to be sent from the Canadian pipeline, sources with close knowledge of the matter said.

S&P Global collects information from trade and independent refinery sources, Kpler, shipping brokers and port sources, and the information has been confirmed by sources with knowledge of the matter.

Top feedstock imports for China's independent refiners ('000 MT)

Source: S&P Global Commodity Insights