China Imports Record Oil as Higher Margins Boosts Purchases

• Nation imported 91.1m tons crude in 1Q, up 13% year-on-year
• China 1Q refining margin surged 68 percent from 2015: ICIS

http://www.bloomberg.com/news/articles/2016-04-13/china-imports-record-crude-oil-as-higher-margins-boosts-buying

China’s crude imports climbed to a record in the first quarter as higher refining margin encouraged refiners to boost purchases.

The world’s biggest energy user increased inbound shipments to 91.1 million metric tons in the first three months of the year, data from the Beijing-based General Administration of Customs showed on Wednesday. That’s equivalent to about 7.34 million barrels a day, 6 percent higher than the previous quarter and 13 percent up from the same period last year, according to Bloomberg calculations. Imports last month fell about 4 percent from February’s record to 7.71 million barrels a day, the third-highest ever.

The nation’s net oil-product exports jumped to 1.3 million tons in March, the highest in three months, Wednesday’s data show. Refiners are importing more oil to take advantage of local retail fuel prices that are frozen when oil trades below $40 a barrel. The margin for major Chinese refineries to process Oman crude was about $16 a barrel in the first quarter, 68 percent higher than last year’s average, according to ICIS China, a Shanghai-based commodity researcher.

“Low oil prices and healthy margins are supporting imports,” Virendra Chauhan, a Singapore-based analyst at industry consultant Energy Aspects Ltd., said in an e-mail. “The strong imports also reflect demand from the teapot refiners.”

Stabilizing Economy

China’s total exports in March jumped the most in a year and declines in imports narrowed, adding to evidence of stabilization in the world’s second-biggest economy. The export rebound may suggest China’s economy fared better than expected in the first quarter, with data due Friday expected to show a 6.7 percent expansion for the period.

A total of 27 independent refiners, known as teapots, have obtained or applied for crude-import quotas, totaling 89.5 million tons as of the end of February, Zhang Liucheng, chairman of China Teapot Alliance, said on March 31. Meanwhile, China awarded additional 230,000 tons of oil product export quotas to teapot refineries in a second-batch allocation, according to ICIS China.

“The teapot plants are very sensitive to refining margins and profitable oil processing in the first quarter certainly boosted their appetite for crude,” Guo Chaohui, an analyst at Beijing-based China International Capital Corp., said before the data were released.

Largest Importer

China may surpass the U.S. as the world’s largest crude importer this year with average inbound shipments of 7.5 million barrels a day, driven by independent plants’ purchases and stockpiling demand, said Zhong Fuliang, vice president with China International United Petroleum & Chemicals Co., the trading arm of the nation’s biggest refiner. The U.S. imported 7.37 million barrels a day last year, according to Energy Information Administration data.

The nation’s crude imports may fall in the second quarter as processing plants take units offline for scheduled maintenance and port congestion delays unloading of cargoes, according to ICIS China and Energy Aspects.

Inbound shipment may fall to as low as 23 million tons a month in the quarter as about 104 million tons of annual primary processing capacity will be shut for maintenance in the April-June period, ICIS China said in an e-mailed report on April 6.

Energy Aspects estimates vessel wait times at ports in Shandong province, where most independent refineries are based, have increased to as long as 30 days, it said in a note dated April 4.