12 Dec 2023 | 09:30 UTC

CHINA DATA: Independent refineries' crude imports increment in Jan to stay low

Highlights

Nov crude imports fall to 17-month low

Shenghong imports first US crude

Fuel oil imports to stay high in Dec

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Chinese independent refineries' crude imports increment in January 2024 was likely to be limited compared with previous months as buying interest for the cargoes softened and differential against the benchmarks declined, market sources said on Dec. 11.

Market sources and analysts had previously expected a strong rebound in the refineries' inflows from November and December in January when the tightness of import quota availability will be eased by the new allocation for 2024.

In November, the refineries' crude imports slumped 25% month on month to a 17 month-low at 11.68 million mt or 2.85 million b/d, S&P Global Commodity Insights data showed.

Buying for January-delivery Russian ESPO -- one of the most favorite crudes for independent refineries -- has slowed in early December.

Deals done in the week Dec. 4-10 were trending to the flat price of ICE Brent Futures on a DES Shandong basis from about 20 cent/b of premium, market sources said.

The offers also fell from premiums of 50 cents-$1/b to 20-30 cents/b against ICE Brent Futures week on week.

"More refiners stayed [on the] sidelines to watch, expecting the price to fall," a Shandong-based refiner said.

A trading source in Shandong said: "Some even prefer to wait until the next trading cycle for the February-loading cargoes, as the differential would decline further."

Around 2.1 million mt of ESPO was imported by independent refineries in November, stable from October, S&P Global data showed.

Same as that of October, 18 cargoes totaling 1.8 million mt were imported by small-sized independent refineries, the rest 300,000 mt was by private refining complex Shenghong Petrochemical, the data showed.

In the first 11 months of 2023, independent refineries imported a combined 27.285 million mt of ESPO, up by 21.8% year on year, S&P Global data showed. ESPO remained as one of the most favorable crude feedstocks for independent refineries, with the rest mainly supplemented by Iranian and Venezuelan barrels.

Brazilian crudes get attractive

Independent refineries started to take Brazilian crude into their procurement consideration in addition to the typical buyer ChemChina, as Tupi is offered at a premium slightly over $2/b against ICE Brent Futures on a DES Shandong basis.

"The price of Tupi is higher than ESPO, but financial cost for the Brazilian crude is lower as the suppliers accept L/C (Letter of Credit) while Russian crudes requires cash," an analyst in Shandong said.

ChemChina was the solo buyer of Brazilian crudes in November despite cutting its imports by 1.7% to 404,000 mt from October.

In the first 11 months, ChemChina took about 5 million mt of the total 5.41 million mt imported by the refineries that S&P Global covers, the data showed.

Contrast to the 55.2% year-on-year increase in Brazilian crudes, Angolan crude dropped 50.9% to 2.13 million mt in January-November.

More US crudes arrive

In November, around 550,000 mt of crudes were imported in two VLCCs from the US, compared with nothing in October, S&P Global data showed.

Private refining complex Zhejiang Petroleum and Chemical as well as Shenghong Petrochemical each imported one VLCC last month.

Shenghong took one cargo of US Medium Sour crude, with ZPC taking the other one, comprising of WTI Midland and US Light Sweet crude.

This was not the first time for ZPC to import US crudes but was the first time for Shenghong to import the medium sour crude from the US.

Shenghong, which imported about 68% of its crude feedstock from the Middle East, also diversified its crude portfolio by importing grades from Russia and the US.

Fuel oil and bitumen blend increase

As expected, the independent refineries' feedstock imports dropped 12.2% month on month to 15.1 million mt, or 3.69 million b/d, the lowest since the 14.6 million mt seen in September 2022, S&P Global data showed.

The reduction was contributed by crudes imports, which slumped 24% on the month to a 17-month low of 11.68 million mt in November. The previous low was 10.3 million mt in June 2022.

But other feedstocks imports surged 86% on the month to 3.4 million mt in November, partly offsetting the drop in crude imports, according to S&P Global data.

The overall feedstocks include crudes that require a crude import quota, as well as fuel oil, bitumen blend and other heavy oil which are quota-free for imports.

Fuel oil imports jumped 74.8% to around 1.22 million mt from October, almost all of which were from Malaysia and Russia.

The government increased fuel oil import quota by 3 million mt in November, allowing the volume to sustain at high levels in December, according to market sources.

Bitumen blend imports also more than doubled month on month to 2.1 million mt in November, S&P Global data showed.

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

Nov-23 Oct-23 Change Nov-22 Change
Malaysia 6,006 6,913 -13.1% 5,778 3.9%
Russia 3,011 2,646 13.8% 2,945 2.2%
Saudi Arabia 2,235 4,020 -44.4% 1,400 59.6%
UAE 1,653 1,566 5.6% 3,113 -46.9%
Iraq 835 710 17.6% 2,104 -60.3%
US 555 - - - -
Brazil 404 411 -1.7% 401 0.7%
Oman 266 266 0.0% 268 -0.7%
Angola 136 133 2.3% 130 4.6%
Total* 15,101 17,206 -12.2% 17,034 -11.3%
Jan-Nov 2023 Jan-Nov 2022 Change
Malaysia 68,830 39,036 76.3%
Russia 45,579 27,547 65.5%
Saudi Arabia 23,173 19,571 18.4%
UAE 19,887 19,226 3.4%
Iraq 10,269 11,337 -9.4%
Brazil 5,409 3,485 55.2%
Oman 5,221 10,266 -49.1%
Kuwait 2,690 5,067 -46.9%
Angola 2,128 4,331 -50.9%
US 2,082 490 324.9%
Total* 189,456 154,109 22.9%

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

Nov-23 Oct-23 Change Nov-22 Change
Mal Blend 2,907 4,840 -39.9% 2,497 16.4%
ESPO 2,109 2,100 0.4% 1,900 11.0%
Arab Heavy 990 1,818 -45.5% 990 0.0%
Upper Zakum 823 835 -1.4% 1,340 -38.6%
Arab Extra Light 685 686 -0.1% - -
Arab Light 560 1,516 -63.1% 270 107.4%
Basrah Heavy 555 - - 829 -33.1%
Al Shaheen 550 130 323.1% 280 96.4%
Urals 480 - - 430 11.6%
Das Blend 280 - - 130 115.4%
Crude subtotal* 11,680 15,367 -24.0% 14,649 -20.3%
Bitumen Blend 2,106 979 115.1% 2,140 -1.6%
Fuel Oil 1,215 695 74.8% 245 395.9%
Other Heavy Oil 100 165 -39.4% - -
Total feedstock* 15,101 17,206 -12.2% 17,034 -11.3%
Jan-Nov 2023 Jan-Nov 2022 Change
Mal Blend 35,844 12,891 178.0%
ESPO 27,285 22,396 21.8%
Upper Zakum 12,907 11,339 13.8%
Arab Heavy 12,035 8,475 42.0%
Urals 8,531 3,370 153.1%
Arab Light 5,913 4,882 21.1%
Oman 5,221 10,166 -48.6%
Basrah Heavy 4,750 1,383 243.5%
Basrah Medium 4,404 7,838 -43.8%
Arab Extra Light 3,825 664 476.1%
Crude Subtotal* 162,328 136,109 19.3%
Bitumen Blend 13,658 16,763 -18.5%
Fuel Oil 11,907 1,237 862.3%
Other Heavy Oil 1,564 - -
Total* 189,456 154,109 22.9%

*Includes barrels from other countries, and other grades

Source: S&P Global Commodity Insights

Editor:

Ribhu Ranjan