SINGAPORE Reuters: Despite Saudi Arabia’s intentions to reduce production next month, China’s Unipec, the trading arm of leading Asian refiner Sinopec (600028.SS), has emerged as a key seller of August-loading Oman crude this month. This has helped to keep benchmark prices in check.
Platts window, also known as the S&P Global trading platform, is used to evaluate the Dubai price, the benchmark for millions of barrels shipped from the Middle East. According to trade sources and statistics compiled by Reuters, Unipec has sold 8 million barrels of Oman oil since the beginning of June.
The reason Unipec was selling such big amounts of Oman crude was not immediately apparent. According to traders and experts, China’s refining margins have been stretched by lacklustre gasoline demand as a result of a slower-than-expected economic recovery. Additionally, Unipec and other Chinese refiners have been importing more barrels from Brazil, Russia, West Africa, the United States, and Russia.
An inquiry for further information about the sales and their causes was not answered by Sinopec.
According to data compiled by Reuters, Unipec sold the Oman cargoes to Totsa, the trading division of TotalEnergies (TTEF.PA), PetroChina Hong Kong, Shell (SHEL.L), and Trafigura (TRAFGF.UL).
The unusually significant Oman crude sales started on June 1, according to dealers, shortly before Saudi Arabia’s unexpected decision on June 4 to reduce July production by 1 million barrels per day and as the world’s top producer upped its official selling prices.
Despite the possibility of tighter Saudi supply, the deals assisted in keeping spot premiums above benchmark Dubai prices below $1 per barrel for the most of June, according to data from Reuters.
There were no such sales made by Unipec in May, and over the last year, it has regularly sold less than 2.5 million barrels of Middle Eastern oil each month via the Platts window.
According to statistics from analytics companies Kpler and Vortexa, June crude supplies to China are expected to increase after reaching the third-highest monthly level in May.
According to the Kpler and Vortexa data, China will import a record 30 million barrels of U.S. crude in June in addition to a massive surge of Russian oil and more than 32 million barrels of West African crude.
According to dealers, Unipec has recently increased its oil imports from West Africa, the United States, and Brazil.
According to Emma Li, an analyst with data analytic company Vortexa, China’s commercial crude inventory has increased to 962 million barrels, the highest level since end-2020, as a result of strong crude imports and refinery maintenance in the second quarter.
According to an estimate by Reuters, China’s refining capacity was shut down for maintenance in May to the tune of 1.22 million barrels per day. Additionally, data obtained by Longzhong consultancy shows that Chinese state refiners reduced operating rates to around 76% in May from approximately 77% in April.
The run reduction came as Longzhong statistics revealed that China’s refining profits were estimated at about 461 yuan ($64.53) per tonne in May, down 45% from April.
The data also revealed that independent refineries in Shandong province’s oil centre, known as “teapots,” had profit margins of around 1,136 yuan per tonne as they gorged on cheap oil from Russia, Iran, and Venezuela.