China’s U.S. oil imports to hit record in July after refiners snapped up bargains
China is set to import a record amount of U.S. crude oil in July, Refinitiv data showed, as the cargoes that bargain hunters snapped up during the April price rout get delivered to the world’s top importer.
An estimated 2.68 million tonnes of U.S. crude could be discharged at the world’s No. 2 oil consumer in July, the data showed. That would be a six-fold jump from the prior two months and above the previous record of just over 2 million tonnes in January 2018.
Chinese refiners mainly bought the cargoes in April when U.S. crude grades slumped to their widest ever cash discounts in the market. Beijing started granting tariff exemptions on U.S. imports from early March.
U.S. flagship grade West Texas Intermediate (WTI) Midland crude was then traded at a spot discount of more than $8 a barrel to ICE Brent on a delivered basis, making it cheaper than Middle Eastern grades, traders said.
“That was the best time for Chinese refiners to buy as delivered cost of U.S. oil would be below $30 for those pricing in April,” said a Beijing-based state oil executive.
Unipec, the trading arm of Asia’s largest refiner Sinopec 600028.SS, and several independent refiners such as Shandong Luqing Petrochemical and Qilun Petrochemical were among the buyers, said senior Refinitiv analyst Emma Li.
China’s overall crude imports are set to hit a fresh record in June, exceeding the previous record in May of 48 million tonnes, the data showed.
The surge in oil imports has led to severe port congestion, especially in eastern Shandong province, the hub for China’s independent plants, industry sources said.
Refiners have to wait a few weeks for vessels to discharge, and face hefty demurrage fees, they said.
Looking forward, however, China’s oil imports appear set to ease as benchmark oil prices rebounded to close to $40 per barrel, worsening refining margins.
“China’s U.S. purchases are solely driven by economics,” said the state oil trading executive, noting that oil will likely make up only a small slice of China’s lofty $52 billion purchasing target of U.S. energy products over two years.
Source: Reuters (Reporting By Shu Zhang and Chen Aizhu; Editing by Himani Sarkar and Ana Nicolaci da Costa)