China’s crude imports from North Sea and Africa rose in May, but the trend is unlikely to continue as the Brent-Dubai price spread hovers over $3/b level, making various light sweet crude cargoes from the west of Suez linked to the European benchmark expensive, Chinese traders said.

In May, China received 2.02 million mt (478,000 b/d) of crude from Norway and the UK, rising 4.1% from April and surging 66.3% year on year, latest data released by General Administration of Customs showed on June 21.

Norway, the producer of Johan Sverdrup field, was the top ninth crude supplier to China in May with 1.5 million mt of shipments delivered, despite slipping 1.6% from April, GAC data showed. In contrast, the volume was merely 255,989 mt in the same month of last year.

These lifted the arrivals from the two suppliers in North Sea by 33.9% on the year to hit 11.65 million mt in January-May.

However, the trend is unlikely to continue. “EFS is too high now, over $3/b, Brent-linked crudes are no longer attractive,” a sweet crude trader with a state-owned oil giant said.

The Brent/Dubai Exchange of Futures for Swaps, or EFS, spread — a key indicator of Brent’s premium to the Middle Eastern benchmark — has averaged $3.22/b to date in the second quarter and hit $3.91/b on June 18, on course to set the highest quarterly average since $3.81/b in Q2 2018, S&P Global Platts data showed.

African inflows to fall

“Not only North Sea crude, but also African crudes are not in our must-buy list recently as they are also Brent-linked,” said a second trader with another state-owned oil company.

Angola, the top African supplier, delivered 3.27 million mt of crude to China in May, up 4.6% from April and 11.7% higher year on year, GAC data showed.

The total crude imports from Africa, however, fell 5% year on year to 5.61 million mt in May, leading the inflows from the continent to edge down 0.9% on the year to 30.2 million mt in the first five months.

Most of the African suppliers sent less shipments to China in over January-May, except Libya, Congo, Nigeria and Cameroon, which increased supplies within a range of 21% to 177% year on year, GAC data showed.

US crude in spot

To compensate for the reduction in light sweet crude purchase from North Sea and Africa, traders said US crude cargoes, which are priced against WTI, would be a better choice.

US jumped to become the tenth biggest crude supplier to China in May, delivering 1.07 million mt of crude in the month. The volume surged 95.3% year on year despite China’s total crude imports declining 14.6% from the same month of last year, GAC data showed.

Meanwhile, Dubai-linked crudes were economical, making Middle Eastern crudes and Russian ESPO blend crude likely to be favored, traders said.

In January-May, Middle Eastern producers hiked their crude supplies by 3.1% on the year to 106.38 million mt into China to secure 48.2% of market share in the Asian top consumer.

Saudi Arabia has been China’s top crude supplier since November, despite its shipments in May slumping 21.5% to 7.2 million mt from the record high of 9.17 million mt in the same month of last year, GAC data showed.

Russia’s delivery also fell 29.4% year on year to 5.44 million mt in May.

In addition to ESPO, Russia also supplies Urals and Sokol to China, which are priced against Brent.
Source: Platts