With oil product stocks at moderate levels, Shandong's teapot refineries have kept refinery run rates relatively high, which is supporting demand for feedstock crudes, sources said this week.
Regular importer Beifang Asphalt Fuel in northeastern Liaoning province plans to import around 500,000 mt/month of imported crudes over January and February, a refinery source said Thursday.
This month, the refinery will take delivery of a 100,000-mt cargo of Russian's Sakhalin blend, 120,000-mt of Nemba crude from Angola, and 34,000-mt of Sarir crude from Libya. Other grades destined for this month arrival, include those Black Lion from Vietnam, Marlim and Roncador from Brazil, which the refinery has processed before.
The refinery, which has a 7 million mt/year export quota, imported around 1.8 million mt of crudes over end-August-December.
Kenli Petrochemical in eastern Shandong province, will take delivery of 100,000 mt of imported crude at Laizhou port early next week.
The 5.8 million mt/year Huifeng Petrochemical late this month will receive around 200,000 mt of imported crudes at Qingdao port: 100,000 mt of Oman crude and 100,000 mt of Russian ESPO crude.
The refinery last month received around 100,000 mt of spot Oman crude stored in Qingdao port, after being granted a quota of 4.16 million mt/year.
The 3.5 million mt/year Chambroad Petrochemical, which last month took delivery of 96,000 mt of Vasconia crude, will probably also receive a similar cargo of imported crude, according to sources.
Besides those refineries that have been granted with the import quotas, other refineries that have been waiting for the final nod from the National Development of Reform and Commission, are also preparing to import crude.
The 2.2 million mt/year Qirun Petrochemical, which expects to be granted a quota of 2.2 million mt/year as early as late this month, has been talking with suppliers for crudes. The refinery previously which has processed around 20,000-30,000 mt of Oman crude bought from other refineries that have crude quotas, found the grade quite suitable.
"But no cargoes have been finalized yet as it is no hurry to book considering of the abundant supply," said the source.
With more teapot refineries being allowed to process imported crudes, the supply of imported crudes in local market has been sufficient. Refineries that have not applied for crude quotas can also source crudes from those that have quotas but do not want to process all the imported barrels in their own facilities.
Refineries that usually process bitumen blend -- a favorite feedstock to those with no access to both domestic and imported crudes -- also have cut their demand for bitumen blend.
BITUMEN BLEND CARGO DUE IN SHANDONG
In the bitumen blend market, only one cargo of around 100,000 mt was heard fixed for January arrival. The 4.3 million mt/year Qicheng Petrochemical will be receiving the cargo to feed its secondary units since its primary crude distillation unit is operating at low run rates, according to sources.
With amply supply of domestic offshore crudes as well as imported grades, fewer teapot refineries still have the need to buy bitumen blend.
Sources said Hongrun Petrochemical's one imported bitumen blend cargo that arrived in November was flagged by local authorities for not carrying a valid form E. The paperwork exempts a cargo from a 8% import tariff.
Sources said this could lead to even less demand for bitumen blend.
NO JANUARY M100 CARGOES
No new cargoes of Russian M100 fuel oil were heard booked by teapot refineries this month.
Sources said Russian state-owned Rosneft's tender of up to 3.5 million mt of M100 fuel oil for loading over January-December 2016 from Nakhodka or Slavyanka, was eventually awarded to Liaoning Futong, not CEFC Energy. The tender premiums remain at around $55/mt to Mean of Platts Singapore 180 CST High Sulfur Fuel Oil assessment on an FOB Russia basis.
That premium would equate to a CFR China price of a $65-$70/mt premium to the MOPS 180 CST HSFO assessment, well above the current market level of $40-$45/mt CFR China, sources said.
