China’s crude imports from Africa fell in July and refinery feedstock shipments from the continent is set to decline sharply in the third quarter due to the slowdown in refinery throughput, while many private-sector refineries grapple with the shortage of crude import quota availability, industry sources and market analysts told S&P Global Platts.
The third quarter started with 4.84 million mt (1.15 million b/d) crude arrivals from Africa in July, declining 5.1% from June and slumped 41.5% year on year, data from the General Administration of Customs showed on late Aug 20.
The drop was led by Angola, the African top crude supplier, with its delivery fell 20.7% to 2.92 million mt in July from June and 18.9% year on year, GAC data showed.
These brought shipments from the continent to retreat 13% year on year to 40.14 million mt (1.39 million b/d) in January-July, with its market share dipped to 13.3% from 14.4% in a year ago.
“This trend will continue as we don’t see a strong sign to recover yet, with slow demand from China,” a Beijing-based analyst said.
Clear evidence of the lack of demand from Chinese refiners came on the day from Unipec, which, looking to find an outlet for some of its term barrels, publicly indicated seven cargoes for delivery to Qingdao or Rizhao in September and October. The grades included Congolese Djeno and the Angolan crudes CLOV, Dalia, Mondo, Mostarda, and Sangos.
Qingdao and Rizhao are not only ports for Sinopec’s refineries to receive crudes but also the main crude entrances for independent refineries in Shandong which favors sweet heavy crudes from West Africa due to their relatively weak desulphurize ability.
Independent refineries’ demands fall
Independent refineries imported about 7.92 million mt of Angolan crude in January-July, taking about 34% of the shipments into China, S&P Global Platts’ data on 36 key independent refineries showed.
However, crude import quota availability of these independent refineries fell to around 40 million mt for August onward, comparing with about 95.72 million mt of crude import in the first seven months, Platts data showed.
In addition, import appetites were also dampened with a slow throughput outlook in Q3. S&P Global Platts Analytics expects China’s throughput to retreat to about 14.4 million b/d in Q3 from about 14.7 million b/d in Q2 amid high oil product inventories, limited oil product export quotas, and sluggish demand due to certain restrictions in place to keep the pandemic under check.
Moreover, the Brent-linked African crudes looked less competitive to Dubai-linked ones due to high Front-month Brent/Dubai Exchange of Futures for Swaps.
The Brent/Dubai EFS averaged at $3.97/b in July for September-loading cargoes, following monthly averages of $3.62/b in June and $3.06/b in May. The indicator finally narrowed in recent days, with a close at $3/b on Aug 20.
US crude in spot
Price-wise, traders said US crude cargoes that are priced against WTI would be a choice to partly compensate for the reduction in sweet crudes purchase from Africa.
The price spread between NYMEX WTI and ICE Brent widened to an average of minus $2.59/b in Aug 1-20 from the monthly average of minus $2/b in July, suggesting WTI-linked crudes were more competitive.
China’s crude imports from US slumped 78.6% to 780,000 mt in July due to the high base a year ago as the country’s effort to fulfill the bilateral trade agreement, GAC data showed.
But the inflows in January-July saw an 87.2% year-on-year growth to 8.99 million mt, supporting US to double its market share to 3% from a year ago.
As a result, North America became the only supplier by region to register a year-on-year shipment increase, at 60.7% to 11.2 million mt in the first seven months.
Even deliveries from the Middle East, the dominated supply region, declined 1.2% year on year to 147.77 million mt to grab 49% of market share, according to GAC data.
China’s total crude imports fell 5.6% year on year to 301.83 million mt in January-July amid destocking activities.
China’s top crude suppliers (million mt)
Source: Platts