China likely released at least 3.84 mil mt of new crude import quotas for 2024

China has likely allocated at least 3.84 million mt (28 million barrels) of new crude import quotas for 11 independent refineries in Shandong province for use in 2024, quota holders said.

Zhejiang Petroleum & Chemical in Zhejiang province and Hengli Petrochemical (Dalian) in Liaoning province also received quotas, they said, though the volumes were not immediately available.

The new quotas were within expectations and brought the total allocation for China's qualified refineries in 2024 to at least 180.7 million mt.

In comparison, the annual ceiling quotas for these refineries stood at 181.5 million mt.

"We anticipate that tepid domestic demand for refined products and weak refining margins will limit crude buying appetites among independent refineries, making this development NEUTRAL for oil prices," Zhuwei Wang, director of East of Suez oil market research at Commodity Insights, said in a First Take note.

The allocation would help the independent refineries in Shandong to bring in their crude imports in December and keep their units running. Recently, some of the quota winners told Commodity Insights they had been anxious about their feedstocks as they were running out of quotas.

Commodity Insights data showed that, in the first 10 months of the year, the combined crude imports by China's small-sized independent refineries fell 15.3% year on year to 76.4 million mt (1.84 million b/d). That volume indicated that about 12.34 million mt of crude import quotas would cover feedstock demand in November-December.

However, nearly 90% of the available quotas, or 11.1 million mt, were held by three Sinochem refineries that had declared bankruptcy.

The new allowances are technically the first batch of quotas to be issued for 2025 but they are required to be used up by the end of 2024, with the volume to be deducted from the annual quota limits for 2025.

Similar allocations firstly occurred in 2022. In mid-2023, the first batch for 2024 was awarded to 11 independent refineries in Shandong province and to Hengli Petrochemical (Dalian) in Liaoning province, totaling 4.7 million mt.

In China, refineries built and operated by state-owned companies CNOOC, PetroChina, Sinochem and Sinopec do not require quotas to import crude. However, all other refineries, including independents and those owned and operated by state-owned companies ChemChina and Norinco, need annual quotas.

China's crude import quota allocations