U.S. OIL FOR CHINA UP

PLATTS - 20 Jan 2021 - China's crude imports from the US surged 211% year on year to 19.76 million mt, or an average 395,746 b/d, in 2020, with the value jumping 89% to $6.28 billion, General Administration of Customs data released Jan. 20 showed.

Imports from the US had averaged 127,147 b/d in 2019. 

Hefty imports from the US in the second half of 2020 made the producer China's ninth-biggest crude supplier for the year. 

China had suspended crude imports from the US over December 2019-April 2020 due to the trade tensions between Beijing and Washington. The inflow resumed in May last year when the world's top crude importer stepped up buying from the US in order to meet the Phase 1 trade deal agreement between the top two economies. 

Arrivals from the US hit an historical high of 952,254 b/d in September. 

Even in December, when China's total crude imports fell 17.9% month on month to the 27-month low of 9.1 million b/d, the inflow from US edged down only 0.36% over the same period to 851,003 b/d, GAC data showed.

BELOW PHASE 1 TARGET

However, the value of the imports remained lower than the Phase 1 trade deal target. 

China in 2017 bought around 153,000 b/d of US crude oil that was worth $3.2 billion at an average price of $57.59/b, GAC data showed. 

Beijing under the deal has committed to buy $18.5 billion more US energy products in 2020 that it did in 2017 and $33.9 billion more in 2021 over 2017 levels, with expectations of similar levels through 2025. 

The deal covers crude oil, LNG, refined products and coal, of which crude oil and LNG are expected to comprise the bulk of the purchases, as they are the most traded and have the largest market in China. 

Analysts said not much was expected to change in the first half of 2021 amid the battle against COVID-19, while China will continue to buy US commodities despite taking longer to meet Phase 1 targets amid low oil prices, which Washington recognizes have been impacted by the pandemic.

SAUDI ARABIA TOP SUPPLIER

Saudi Arabia remained China's top crude supplier in 2020 for the second year at 84.92 million mt or 1.7 million b/d. 

However, the year-on-year growth was 1.9%, lagging behind Russia's 7.6% increase. Russia delivered 83.57 million mt, or 1.67 million b/d, of crude to China in 2020. 

"Around 40% of China's crude imports from Russia are typically bought by the [small-scale] independent refineries, so as these players scale down their crude purchases, so did imports from the country," S&P Global Platts Analytics said in its latest China monthly report. 

Therefore, the robust growth in Russian crude is difficult to repeat as the small-scale independent refineries' import volume is capped, because at least four of them are expected to be demolished in 2021 amid a refining upgrade project in Shandong. 

These four refineries currently hold 4.1 million mt/year of crude oil import quota, which will be partially frozen when they are officially demolished.

DEPENDENCE ON MIDDLE EASTERN CRUDE TO RISE

Moreover, China's dependence on Middle Eastern crude will increase further in 2021 as the country's greenfield refineries are designed to process medium-sour crudes from the region, Platts Analytics noted. 

Shipments from the Middle East jumped 13% year on year in 2020, outpacing China's total crude import growth of 7% in the year, the GAC data showed. 

Despite the limited increase from Saudi Arabia and a 73.5% year-on-year decline from Iran, the 11.7%-104% increments from Iraq, Oman, Kuwait and the UAE enabled the Middle East to take 46.7% of China's market share ahead of Africa and Latin America, up from 44.4% in 2019. 

Market sources expected a recovery in inflow from Iran if sanctions on the producer are lifted by the incoming Biden's administration in the US. 

China imported a total 3.92 million mt of Iranian crude in 2020, compared with 14.77 million mt in 2019 and a high of 31.3 million mt in 2016, according to GAC data. 

Meanwhile, crude oil imports from Venezuela dropped to zero in 2020, GAC data showed. However barrels such as Merey crude from the producer may have been imported under different classifications, market sources said.

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