China’s independent refiners have been increasing their purchases of Middle Eastern oil, taking advantage of lower prices and abundant supplies.
This comes as Gulf oil exports flow to Asian markets, after the stability of navigation through the Strait of Hormuz.
Refineries, mostly concentrated in Shandong province, saw a significant rise in purchases of Gulf crude.
This is a clear shift from the previous period, when it relied more heavily on Iranian and Russian oil.
Abu Dhabi National Oil Company (ADNOC) sold about 2 million barrels of Upper Zakum crude to two Chinese companies, at discounts ranging from $7 to $9 per barrel compared to Dubai crude.
A Chinese company also bought additional shipments of Saudi crude on the spot market.
Meanwhile, other refiners have struck deals to buy Iraq’s Basra heavy crude and Qatar’s Shaheen crude, at prices about $5 per barrel lower than Brent, boosting the attractiveness of Gulf oil.
Traders noted that increased supply contributed to improved refining margins within Chinese refineries.
Profits rose to between 200 and 400 yuan a tonne, after recording losses over the past month.
In turn, these developments have put pressure on Iranian and Russian oil.
Iranian and Russian crude prices fell as a result of strong competition from low-cost Gulf supplies.
Shipment tracking data also showed that Iran’s oil exports rose to about 1.2 million barrels per day, in conjunction with the interim agreement between the United States and Iran.
However, analysts believe that the abundance of supply may keep the competition strong in the Asian market in the coming period.
As China continues to search for the best prices and the most economically viable supply.
Read also:
