DUBAI FUTURES: Chinese demand in focus after release of crude import quotas

Backwardation in the sour crude market strengthened marginally Oct. 15 following the release of the fourth batch of crude import quotas to Chinese refineries, which placed the spotlight on Chinese demand.

At 11 am in Singapore (0300 GMT), the November/December Dubai crude futures spread was pegged at $1.07/b, up 4 cents/b from the Asian close on Oct. 14, Platts data showed.

The December/January spread was pegged at 85 cents/b, up 4 cents/b from the previous days close.

Meanwhile, the December Brent/Dubai EFS was pegged at $4.08/b, ticking down by 3 cents/b from the Asian close on Oct. 14, Platts data showed.

China's qualified refineries, mostly independent refineries, were allocated the final batch of crude oil import quotas for 2021 at 14.89 million mt, Platts reported earlier.

The issuance of the widely awaited fourth batch of crude import quotas provided clarity to demand fundamentals from Chinese independent refineries for December-arrival barrels, as the quotas are only valid for imports in 2021.

"Should have some support [on demand], but they might have bought quite some already," said a Singapore-based crude oil trader.

Most traders expect the impact on demand to be limited, as the quota allocations were largely within expectations, and Chinese refineries had already begun procurement for December-arrival barrels before their issuance.

"Looks like no surprise and slightly towards the downside, lesser than last year, so I think should not have major buying activity," said another crude oil trader.

Traders are also tracking the possibility of some refineries having purchased more crude than their quota allocation amid lower than expected quotas issued.

"Store or resell, both [are] possible," said a trader at a Chinese independent refinery.