China's teapots are raking in crude
Russia pips Saudis again as top China crude supplier in March
BEIJING, April 21, 2016
Russia beat Saudi Arabia as China's top crude oil supplier in March, a follow-on to taking the No 1 spot in four months of 2015, customs data showed, due to strong purchases from the Chinese independent refineries known as "teapots".
Shipments from Russia rose 58 per cent last month from a year ago to 1.09 million barrels per day (bpd), data showed. This compared with February volumes from Russia at 1.03 mbpd and an all-time high at 1.13 mbpd in December.
But demand for Russia's main export grade ESPO is expected to soften in the second quarter as rising crude prices squeeze refiners' margins and China's independent refiners experiment with other suppliers.
"ESPO demand will ease in the second quarter as refineries see it as relatively costly," said a senior Beijing-based trader who deals with teapots, adding that the buyers might be attracted by cheaper grades from West Africa and Brazil.
The weakening sentiment for the ESPO grade was reflected in its premium narrowing to $2.1 a barrel over Dubai quotes in the last month, from a premium of $5.5 a barrel previously.
More than 20 independent refineries, mostly in coastal Shandong province, have either applied for or been granted quotas for the use of imported crude oil. They are the main buyers of the Russian grade due to the smaller cargo sizes and lower transportation costs.
The relatively smaller ESPO cargo sizes make it possible to dock ships at smaller terminals, while larger shipments from the Middle East and West Africa face worsening discharge delays at the Qingdao port.
For the first quarter, Russian crude supply to China gained 42 per cent on year to 12.12 million tonnes, or about 972,300 bpd on average.
March imports from Saudi Arabia eased 1.73 per cent year on year at 936,500 bpd, off steeply from February's 1.38 mbpd, the second highest on record.
Markets are closely watching the volumes of Saudi supplies going to its oil clients after a plan by major oil producers to freeze production was scraped.
China's shipments from Iran dropped 7.5 per cent on year to 590,830 bpd in March, up from February's 538,000 bpd.
Iran, once the No 2 producer in the Organization of the Petroleum Exporting Countries after Saudi Arabia, is pledging to ramp up production and regain lost markets following the lifting of Western sanctions in January.
Iraqi shipments to China soared 77 per cent in March on year to about 679,600 bpd, and rose nearly 10 per cent for the first three months of the year versus a year ago. -- Reuters
