CHINA DATA: ESPO retains sweet spot as No. 1 crude pick Jan-Oct for independent refineries

Singapore — China's independent refineries' imports of ESPO crude have remained strong, with the Far East Russian grade taking the top spot both in October and in the January-October period despite concerns of a few refineries cutting throughputs due to tough market conditions, showed information and data collected by S&P Global Platts on Nov. 4.

About eight refineries and five trading companies imported 26 such cargoes totaling 2.47 million mt in October, up 10.6% month on month.

Total imports of ESPO stood at 19.57 million mt through January-October, up 8.1% on the year, with Brazilian Lula crude imports hovering about 12.98 million mt over the same period, according to Platts data.

A steady stream of inquiries for first-half January 2021 ESPO cargoes was also seen in the week started Nov. 1, after China's Ministry of Commerce released Nov. 2 its ceiling import quota volume of 243 million mt for 2021.

However, few deals have been concluded yet as the price expectation between buyers and sellers varies a lot, sources said.

Offers for H1 January delivery ESPO cargoes on a DES Shandong basis were about a premium of $1.80/b against ICE Brent futures, slightly lower than offers in the week ended Oct. 31 at about ICE Brent plus $2/b, they said.

"The market has been a bit quiet now as independent refineries are still watching and waiting [for the first batch of 2021 import quota allocations]," said a trade source.

SAUDI ARABIA GARNERS THIRD SPOT

With massive buying by two new independent oil companies -- Hengli Petrochemical (Dalian) Refinery and Zhejiang Petroleum & Chemical, or ZPC -- crude imports from Saudi Arabia shot up to the third place in both October and January-October.

In October, about 60% of those imports were taken by Hengli, and the rest by ZPC, both of which have long-term contracts with Saudi Aramco.

Of the crudes from Saudi Arabia in October, 42.5% were Arab Medium, 36% Arab Heavy, and about 21% comprised Arab Light grade.

Hengli and ZPC's appetite for other crude grades from the Middle East like Upper Zakum, Murban, as well as Basrah Light, has also remained robust, providing an impetus to increased shipments from the UAE and Iraq this year.

As far as grades from Iraq are concerned, Shandong's independent refineries mostly favor Basrah Heavy while Hengli and ZPC prefer Basrah Light.

Meanwhile, total imports of Upper Zakum also increased by about 48.1% month on month at 1.28 million mt in October.

Total imports from Saudi Arabia and Iraq amounted to 32.67 million mt in the first 10 months of the year, or about 20% of the total, making it the highest for a region among the top five.

Angola was the third largest exporter in 2019 after Russia and Brazil. However, it slipped to the fifth place in January-October, with exports of 12.98 million mt, down 7.6% year on year.

The US, a key supplier of Mars, WTI, ANS, among other grades, made its way into the top 10 suppliers, exporting about 4.1 million mt crude in January-October, more than 10 times year on year.

CHESTNUT DISCHARGED

Meanwhile, about 60,000 mt of the new North Sea Chestnut crude grade has finally been discharged into tanks after it was stranded at the port for more than two months due to port congestion. It was coloaded with 80,000 mt of Balder from Norway.

The cargo, which was the first to arrive into Shandong markets, was brought in by Luqing Petrochemical.

Luqing will discharge a second cargo of about 270,000 mt of Mars crude in November after receiving the first 175,000 mt of ANS last month.

Platts collects information that covers crude and bitumen blend imported for independent refineries in Shandong province, Tianjin, Zhoushan and Dalian, including 38 crude import quota holders and a few non-quota holders.

The barrels include those imported directly by the refiners, as well as cargoes bought by trading companies on behalf of the independent refiners that were discharged into tanks.

The 38 refiners had been awarded a combined 153.9 million mt of import quotas so far this year, accounting for 85.7% of the county's total allocations for independent refineries, in three batches.

Top 10 crude suppliers for independent refineries (Unit: '000 mt):

Top 10 crude grades for independent refineries (Unit: '000 mt):

Source: S&P Global Platts data, company sources