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Chinese refiners cool on crude purchases as oil futures rally

March 01/2021

MOSCOW (MRC) -- China's crude oil imports are set to slow in the second quarter after Brent prices hit a 13-month high, cooling demand and capping refiners' margins as they prepare to shut for planned maintenance, industry sources and analysts said, as per Hydrocarbonprocessing.

Expectations of a recovery in global fuel demand and tighter oil supplies from Saudi Arabia and the United States pushed front-month Brent futures to their highest since January 2020 this week, up around 30% from January. Chinese independent refiners, who account for a fifth of the country's import demand, have become reluctant to buy cargoes as they enter a low-demand season, while domestic margins have yet to catch up with strong gains in international prices, the sources said.

Easing purchases from China, the world's largest crude importer, led to a drop in spot prices for Middle East and Russian grades this week, while prices of crude from other regions such as Africa and South America have also weakened. "Demand is very slow now and there are many available cargoes to choose from," said a source at a Chinese refinery, adding that high oil prices have cooled buying interest. "The lack of substantial demand, plus strong backwardation, put a lot of pressure on traders," said a source with an Asian refiner, noting an increasing number of unsold cargoes due to arrive in Asia in March and April.

The sources declined to be named due to company policies. Iraq's Basra Light crude and Upper Zakum from the United Arab Emirates have dropped to discounts against their official selling prices (OSPs) in spot purchases by Chinese refiner Hengli Petrochemical, traders said. Companies typically do not comment on their trades. More than 10 Chinese independent refiners, including one operated by Zhenghe Petrochemical, a subsidiary of ChemChina, and Shandong Qicheng Petroleum Chemical's plant, will shut for maintenance between March and June, according to Chinese consultancy JLC. Capacity at both plants are at 5 million tonnes per year (tpy).

The run rate at independent refineries is expected to fall below 70% in April, from around 74% presently, JLC analyst Zhou Guoxia said.

As MRC informed before, earlier this week, ExxonMobil Corp said it will close its 72-year-old Altona refinery in Australia, the countrys smallest, and convert it to a fuel import terminal as refiners struggle with low demand.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased.
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, neftegaz, petrochemistry, Exxon Mobil.
Category:General News
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