Iraqi oil replaces Iranian oil in Chinese refineries
Reuters revealed on Tuesday that independent Chinese refineries have increased their purchases of Iraqi and Qatari crude oil for October and November shipments to compensate for declining Iranian supplies, coinciding with the recovery of exports from other Gulf producers through the Strait of Hormuz. IraqBanking Reforms
The agency quoted traders in a report translated by Shafaq News Agency as saying that Chinese refineries bought at least 12 million barrels of Iraqi and Qatari crude through oil trading companies Mercuria, Totsa and Trafigura, while one trader estimated the total purchases at between 15 and 20 million barrels.
According to the sources, the shipments were sold at premiums ranging between $12 and $20 per barrel above the price of Brent crude on the Intercontinental Exchange (ICE), on a delivery basis, and the majority of the purchases were of Basra Medium and Basra Heavy crudes, which are among the cheapest types of crude available in the Middle East.
The list of buyers included Hongren Petrochemical, Chi Cheng Petrochemical, Chi Run Petrochemical, Halong, and Chambrod Petrochemical, according to sources.
One trader said that Iraqi oil has become the “new standard” for independent Chinese refineries, due to the abundance of supplies and the speed with which they are available.
Hongren and Shinqi Petrochemical also purchased 3 million barrels of Qatari Al Shaheen crude, with shipments expected to arrive in early November, according to sources.
According to Reuters, independent Chinese refineries have relied heavily in recent years on discounted crude from sanctioned producers, particularly Iran, but China’s imports of Iranian oil fell in September by about half compared to the previous year, to 590,000 barrels per day, the lowest level since January 2023, according to data from analytics firm Kpler.
The volume of Iranian crude stored on tankers outside the blockade zone has fallen by more than half, to 45 million barrels, compared to 100 million barrels in late July, according to Kpler.
The company’s data showed that Iran did not export any crude oil during September, for the first time since Kpler began tracking Iranian oil flows in 2013.
As oil exports through the Strait of Hormuz recovered, trading companies lowered their bid prices to stimulate demand from independent Chinese refineries, with one trader saying buyers were no longer willing to pay spot premiums exceeding $20 a barrel.
Refinery operating rates in Shandong province fell to around 55% by the end of September, compared to around 60% at the beginning of the month, according to Horizon Insights consultancy, as refining margins deteriorated after China curbed fuel price increases, coinciding with rising crude costs.
Company data showed that refineries were incurring losses of between 250 and 500 yuan ($37.29 and $74.58) per metric ton in late September, compared with profits of around 500 yuan per ton at the beginning of the month.
Shafaq.com