Traders and analysts said that China is now raising the buying pace for crude oil and paying higher premiums to secure supplies from November onwards as lockdown restrictions ease.
Energy Aspects noted that at the third week of August, Chinese majors’ crude inventories were very low. Once the government wraps up inspections on the resale of import quotas and tax evasion by importers, the country’s smaller independent refiners (teapots) will also be able to import crude.
As Beijing eases lockdown measures that were applied to start in July, oil demand is estimated to be on a recovery path.
"Over the past week we have been seeing lots of teapot activity, which is healthier," a Singapore-based trader said. "Suppliers are more bullish now compared with weeks ago,” they added.
In these past few months, China's demand for spot crude was slower due to a shortage of import quotas, drawdowns from high inventories, and coronavirus-related lockdowns that muted the country’s fuel consumption.
According to Emma Li of analytics firm Vortexa, in both July and August, imports into Shandong, home to most independent refiners, fell below 3 million barrels. In comparison, in the first half of 2021, they posted an average of 3.55 million barrels.
Chinese buyers have been seen buying some crude grades at higher premiums than in the previous month, while inquiries from independent refiners have increased as well.
The Angolan crude Dalia saw its cargo of October-loading quickly snapped up, while Cabinda and CLOV cargoes have also moved, likely to Chinese buyers and at USD1/barrel premium to January ICE Brent for November delivery. It showed a sharp contrast to July.
Petroleos Brasileiros (Petrobras) has sold 2 million barrels of Brazilian Tupi crude to Sinopec’s trading arm Unipec at USD1/barrel higher than January ICE Brent for November delivery. Tupi for October delivery to China traded at 20 cents/barrel above December ICE Brent futures.
