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2018-02-07 08:05:00

RUSSIAN OIL TO CHINA UP

RUSSIAN OIL TO CHINA UP

PLATTS - Russia has retained the crown as China's top crude oil supplier for the second year in a row in 2017, lifting sales to Asia's biggest oil consumer by nearly 14%.

Russia's dominance has prompted many market participants to believe that it might be tough for any other supplier to displace the non-OPEC exporter from the top spot even in 2018.

China's Russian imports were likely to increase as a new pipeline comes onstream, making it easier to bring in the barrels, while independent refiners deepen their relations with Russian crude suppliers.

"We estimate that Russian crude inflows to China will likely grow by at least 11% in 2018. There will also be additional availability in the seaborne market, as PetroChina will take almost all its barrels through the doubled capacity pipelines," said Wang Zhuwei, senior analyst with S&P Global Platts China Oil Analytics.

Russia remained the largest crude supplier to China in December, despite shipments easing 0.2% year on year to 5.03 million mt. Russia's overall crude sales to China for the whole of 2017, however, rose 13.9% year on year to 59.8 million mt, edging out Saudi Arabia from the top position.

China's crude imports from Saudi Arabia in December surged 31.7% on the year to 4.71 million mt, or an average of 1.11 million b/d, data from the General Administration of Customs showed. The big jump in December inflows raised Saudi Arabia's total crude supplies to China by 2.3% to 52.18 million mt for the whole of 2017.

This meant China's imports from Russia in 2017 were 7.62 million mt higher compared with inflows from Saudi Arabia, versus 1.48 million mt in 2016, signaling that the gap between inflows of Russian crude and Saudi crude had widened substantially in absolute terms.

Market participants were of the view that this would widen even further in 2018, as PetroChina would rely more on pipeline to take their term volumes from Russia, which in turn would push up availability of seaborne cargoes for other buyers.

"PetroChina is expected to take around 28.7 million mt of crude from Russia via pipelines in 2018, up from around 24.9 million mt in 2017," said Wang, adding that China's seaborne imports of Russian crude would rise about 8.6% to around 37.9 million mt in 2018, after taking into account new Russian crude supplies from private company CEFC China Energy as part of its term contract with Rosneft.

Traders said Saudi Arabia is also likely to increase supplies to China for CNOOC's new facility in the south at Huizhou, as well as for PetroChina's new Yunnan refinery, which were launched in H2 2017.

Meanwhile, state-owned Norinco's Huajin refinery will also lift its term contract volumes with Saudi Aramco to 12 million barrels in 2018, up 50% from the actual delivery of 8 million barrels in 2017.

In 2017, China's imports from OPEC members rose 7.1% year on year to 4.70 million b/d, or 234.22 million mt. But the market share fell to 55.8%, from 57.4% in 2016. Middle Eastern producers' market share also shrank to 43.4%, from 48%.

US CRUDE

North America's market share jumped to 2% in 2017, from only 0.2% in 2016. The jump was due to an increase in supplies from the US, which surged to 7.65 million mt in 2017, from 645,703 mt in 2016, making it the 14th largest supplier to China.

The US also made it to the top 10 list of China's crude suppliers once in 2017 -- getting the ninth spot in October.

Unipec, the international trading arm of Sinopec, has fast emerged as a leading US crude oil exporter in 2017, according to markets sources who spoke to S&P Global Platts. Over January-October 2017, Unipec exported 100,675 b/d of crude from the US, Platts data showed.

About 80% of the volume that Unipec exported went to Chinese refineries directly, while companies, such as BP and Trafigura, also sent US crudes to China, a source with knowledge of the matter said.

The trend is likely to continue in 2018. Not only are refiners along the coast processing US crudes, but even inland refiners are also increasingly taking US grades.

Sinopec's inland refinery Jinan Petrochemical favors US light sweet crude to meet tighter emission norms, as it is located in the capital of Shandong province. Another landlocked refinery, Sinopec's Luoyang Petrochemical, said it has started to take US light crudes.

Some international traders said they plan to bring more light sweet crudes from the US for producing lighter components as more reformers come on stream in 2018. In addition, refiners will also need them to lift gasoline production to make up for the supply reduction from the blending pool.

OTHER SUPPLIERS

Among the top 10 suppliers, the biggest year-on-year growth in volume to China last year was by Brazil, with shipments rising 20.6% to 23.08 million mt.

China has been taking 50% of the Latin American country's crude exports. Crude imports by independent refiners from Brazil also jumped 50.4% year on year to 7.83 million mt in 2017.

Meanwhile, the UAE's crude sales to China posted the sharpest fall in 2017, dropping 16.6% year on year to 10.16 million mt.

Shipments from Oman dropped 11.6% year on year to 31.01 million mt in 2017, making the supplier slip to the sixth place from fifth in 2016.

"US' Mars and Russia's Urals have significantly replaced Oman in 2017 due to the narrow EFS amid OPEC's production cut deal," a trader with Chinaoil said.

The Brent/Dubai Exchange of Futures for Swaps, or EFS, is a key indicator of Brent's premium to the Middle Eastern crude pricing benchmark. A weak EFS typically makes Middle Eastern grades less competitive than the grades linked to Brent/WTI, like the Russian Urals and US Mars which have similar specifications as Oman.

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Earlier:

 S-E.Asia
2018, February, 2, 12:15:00

CHINA'S OIL INVESTMENT UP

BLOOMBERG - The Beijing-based explorer sees capital expenditures at 70 billion to 80 billion yuan ($11.1 billion to $12.7 billion) for 2018, it said in a statement to the Hong Kong stock exchange Thursday. That’s an increase of as much as 60 percent from the previous year, which came in under target. It also raised its production estimate to between 470 million and 480 million barrels of oil equivalent, poised for the the first increase in three years.

 

 S-E.Asia
2018, January, 26, 12:25:00

CHINA'S ARCTIC ROAD

REUTERS - “China hopes to work with all parties to build a ‘Polar Silk Road’ through developing the Arctic shipping routes,” the paper, issued by the State Council Information Office, said.

 

 S-E.Asia
2018, January, 17, 23:40:00

CHINA'S OIL DEMAND UP 4.6%

PLATTS - China's apparent oil demand is expected to rise 4.6% year on year to hit 600 million mt (12.05 million b/d) in 2018, with net crude imports to increase 7.7% to 451 million mt, according to a report released Tuesday by state-owned China National Petroleum Corp.'s Economics and Technology Research Institute.

 

 S-E.Asia
2018, January, 5, 23:40:00

IRAQI OIL TO CHINA

PLATTS - China's crude oil imports from Iraq in November surged 47.2% on year and 58.8% on month to hit a record high of 4.21 million mt or an average 1.03 million b/d, making the Persian Gulf producer its third-largest supplier, data from China's General Administration of Customs showed.

 

 S-E.Asia
2018, January, 3, 15:55:00

RUSSIA - CHINA OIL FRIENDSHIP

BLOOMBERG - After a glut sparked the biggest price crash in a generation and starved Russia of oil revenues, the nation sought to boost market share in the world’s top importer. It’s now supplanted Saudi Arabia as the top exporter to China, even as the two producers lead efforts to shrink the global oversupply by curbing output. A pipeline that transports crude from the East Siberia-Pacific Ocean system has helped its mission to increase volumes.

 

 S-E.Asia
2017, December, 8, 17:35:00

CHINA STRENGTHENS FINANCE

IMF - The system’s increasing complexity has sown financial stability risks. Given the centrality of banks to the financial system, the FSAP team recommended a gradual and targeted increase in bank capital. The authorities have recognized these risks, including at the highest level, and are proactively taking important measures to address them. These include the strengthening of systemic risk oversight, further improving regulation, and moving toward functional supervision.

 

 S-E.Asia
2017, November, 29, 09:40:00

SOUTH CHINA SEA OIL

OGJ - Phase II production from Weizhou 12-2 oil field has been brought on stream, CNOOC Ltd. said of its project in Beibu Gulf in the South China Sea.

Tags: RUSSIA, CHINA, OIL