China allows independent refineries to use 2024 crude import quotas in Dec

The Chinese government is allowing independent refineries to use their crude oil import quotas for 2024 in advance to bring in barrels in December to ease their tightness in allowance availability for 2023, but few refiners are interested to apply, serval quota holders told S&P Global Commodity Insights on Dec. 11.

The volume of quotas for 2024 that each of the refineries apply for utilizing in 2023 will be deducted from their allowance to be used in 2024, the refineries said.

Moreover, the advanced quotas are required to be used by end-2023 as the unused volumes are not allowed to roll over to 2024, they added.

The refineries need to submit their applications on Dec. 11 if they need the advance quota, but it is unclear when they will gain the allowances.

S&P Global Commodity Insights spoke to six quota holders, and five of them said they will skip the application, while one did not share their decision.

"The move reflected that the government has realized our needs, but the permission comes too late. It is already mid-December and we have finalized our throughput and import plan in December amid tight 2023 import quota availability," a Shandong-based independent refiner said.

Independent refineries, especially those in Shandong have suffered from limited crude import quota availability since September or October. With domestic demand for oil products also slowing down as winter came, they solved the problem by lower throughputs and increasing alternative feedstock imports, such as fuel oil and bitumen blend.

"The advance quotas lead to a reduction in the availability of 2024, we would prefer to follow our original plan and save the quotas for flexibility for next year," a second Shandong-based source said.

China set the cap for crude oil import quotas at 243 million mt or 4.88 million b/d for 2024, keeping the limit unchanged from 2023, 2022 and 2021, S&P Global reported.

Meanwhile, a Beijing-based market analyst said the advance quotas are unlikely to boost crude imports in December significantly. "The procurement and delivery window is too short with only 20 days left. It is more possible for the refiners to bring in the barrels from China's bonded storage to the plants with the quotas, which has no impact on China's overall imports," the analyst added.

China imported 11.32 million b/d of crude over January-November, up 12.1% year on year, customs data showed. Independent refineries' crude imports jumped 19.3% year on year to 3.56 million b/d in the first 11 months despite the volume dropping 20.3% year on year to 2.85 million b/d in November, S&P Global data showed.