China's independent refiners receive 1.37 mil mt US crude in July amid port congestion

Singapore — China's independent refineries ramped up US crude imports in July, picking up 1.37 million mt in the month, while at least 965,000 mt of North American crude cargoes are waiting to be discharged for the private companies in August, according to market information collected by S&P Global Platts.

The US crude shipments in July consisted of 545,000 mt of Alaskan North Slope crude, 392,000 mt of WTI, 270,00 mt of WTI Midland, and 125,000 mt of West Texas Light.

About half of the July US crude barrels could have counted as official imports for June, but the cargoes were cleared and discharged after a month-long delay due to severe port congestion in Shandong province.

Four cargoes of US crude totaling 631,000 mt reached Chinese waters in June, but not a single drop of oil was delivered to the independent refining sector during the month as the tankers had been stuck in a long queue in Shandong waters since early June, port officials and refinery sources said.

The bulk of the July shipments were purchased by Zhejiang Petroleum & Chemical, Shenchi Petrochemical, Hengli Petrochemical, Luqing Petrochemical and trading company MME, Platts data showed.

At least four cargoes of medium sour Mars Blend crude totaling 965,000 mt, are currently waiting in the queue to be discharged, which could push the independent refining sector's import of US crude higher in August.

Data intelligence firm Kpler said China imported a total of 2.98 million mt of US crude in July, and the volume is set to reach 3.92 million mt in August.

Independent refiners resumed North American oil purchases in late March with the first batch of US crude cargoes for the year arriving in May, which also marked the country's first import of US crude since December 2019. The May shipments totaled 345,000 mt and comprised Mars Blend, WTI Midland and ANS.

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CHEAPER THAN ESPO

The independent refining sector found several US grades more attractive than its staple diet of Russian ESPO Blend crude, sweet and sour crude trading managers based in Beijing, Hong Kong, Shandong and Singapore said.

Although many Asian refiners find US flagship export grade WTI relatively more expensive this year when compared with various Middle Eastern, South American and Far East Russian grades on a delivered basis, other US grades including ANS and Mars Blend remain competitive.

Platts data showed the spread between US LOOP Sour on a CFR North Asia basis and Russian ESPO on an Asia delivered basis has averaged minus $1.21/b to-date in the third-quarter, minus 82 cents/b in Q2 and minus $3.75/b in Q1. LOOP Sour is a blend of medium and heavy-end Middle Eastern crude grades, and two US domestic crudes including Mars Blend.

In addition, Chinese and other Northeast Asian refiners including South Korea's GS Caltex typically find ANS crude attractive due to relatively cheaper logistics costs.

Industry sources noted that the voyage from Alyeska Valdez, Alaska Marine Terminal, to North Asia is typically less than three weeks, which compares with up to 30 days from Persian Gulf ports and more than 45 days from the US Gulf Coast.

NEW GRADES

Meanwhile, independent refiners continued to take advantage of low outright oil prices to test new crude grades as feedstock in July.

The independent refining sector had received a total of 56 crude grades in July, which was higher than the average 30-40 grades in previous months.

The new grades included Khafji from the Saudi Arabia-Kuwait Neutral Zone and light sweet Novy Port crude oil from Russia's Arctic region, taken by ChemChina.

Meanwhile, Hongrun Petrochemical for the very first time received Flotta Gold and Ross Blake from the North Sea market.

In addition, Luqing Petrochemical took the sector's maiden shipments of Malaysian Bintulu and Labuan crude, while Fuahai Group took the Sururu grade for the first time from Brazil, Platts data showed.

A few more new grades are expected to be discharged in August, with Luqing Petrochemical set to receive North Sea Chestnut and Balder crudes.

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

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

Source: S&P Global Platts data, company sources