As Middle Eastern crude prices have increased, Chinese refiners have increased purchases of Brazilian and West African crude.
This comes as refiners reorganize their sourcing due to sanctions, tariff disruptions, and price fluctuations, Reuters reported on Wednesday.
US sanctions on Russian and Iranian oil, coupled with Chinese tariffs on US oil, have disrupted global oil markets and impacted China significantly.
These actions have led to higher procurement costs, potential supply shortages, and increased fuel prices for Chinese consumers, which could negatively affect the Chinese economy.
Imports from Brazil likely to rise
Vortexa senior analyst Emma Li stated that China’s crude imports from Brazil are expected to increase in the latter half of February, according to the report.
Monthly volumes could reach 3 million metric tons, equivalent to 800,000 barrels per day.
This would be the highest import level in at least eight months.
China’s crude imports from Brazil and Angola are expected to rise significantly this month, with Kpler data showing a 49% month-on-month increase in Brazilian crude and a 36% month-on-month increase in Angolan crude.
Moreover, traders and analysts anticipate that more cargo from those regions will arrive in March and April due to the risks and uncertainty surrounding sanctioned oil.
Shandong Yulong Petrochemical, the newest refinery in China, is gearing up to commence operations of its 200,000 barrels per day crude unit shortly, with a projected start date sometime in March or April.
Oil imports from Africa
In preparation for this launch, the company has recently secured a substantial shipment of Western African crude oil.
This large purchase is scheduled to arrive in March, with loading taking place in late February or early March, Reuters said.
Yulong, a Chinese energy company, has made a significant purchase of African crude oil for March delivery.
The company has acquired four shipments of Angolan oil, encompassing a variety of grades including Dalia, Plutonio, and Girassol.
In addition to the Angolan oil, Yulong has also secured a cargo of Nigerian Nemba crude.
This information comes from a trader with direct knowledge of the transactions, highlighting Yulong’s active involvement in the international oil market and its strategic procurement of crude oil from diverse African sources to potentially meet its refining and energy needs.
A separate trade source revealed that state trader Unipec purchased over 20 million barrels of Brazilian crude for April delivery.
Additionally, the refiner acquired two April shipments of Brazilian crude.
Rising premiums
Traders said that premiums have increased by approximately 50% since the U.S. sanctions were imposed on January 10.
This is due to increased demand for Brazilian and Western African crude, as refiners are seeking to avoid the high prices of Gulf crude.
Saudi Arabia, which is the second largest crude supplier to China after Russia, increased its crude oil prices for March shipments. The price hike is the highest in over a year.
Saudi Arabia will see a decrease in crude oil purchases from Chinese buyers in March, according to the report.
“Chinese refineries that are not exposed to fuel oil import tariffs and reductions in fuel oil consumption tax rebates continue to see healthy margins,” June Goh, a senior oil analyst at Sparta Commodities told Reuters.
She added:
In order to capitalise on this, they will be looking for crudes that are non-sanctioned and Brent-related to capture the narrow Brent-Dubai spread.
Goh stated that Brazilian Tupi and West Africa crude oil are also options for Chinese buyers after maxing out Canadian TMX grade purchases.
This is due to Beijing’s 10% tariffs on U.S. crude imports, which also make these options more attractive.
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