Chinese oil imports from Americas boosted as Middle East increases refining capacity

Chinese oil imports from US, Canada, Brazil reach all-time high in March

Chinese oil imports from Brazil, Canada and the United States are expected to increase as the country’s largest crude buyer Sinopec, ensures crude supplies stability at a time when the Middle East is boosting its refining capacity and African producers are experiencing supply disruptions.

Exports from the Americas hit an all-time high in March according to data from Thomson Reuters Oil Research & Forecasts.  The region’s share of the Chinese market grew by 1.1 per cent in Q1, almost up to 14 per cent.

“We’re facing a big challenge on the supply side,” Chen Bo, president at Unipec, which purchases crude for Asia’s largest refiner Sinopec told Reuters.

At a seminar earlier this week, Chen said in order to meet its growing demand, Asia needed to increase crude imports from the “new frontier”, which includes the United States, Canada and Latin America.

According to Chen, China is expected to overtake the US as the world’s largest oil consumer in 2017.  Between 2016 and 2020, China will add just under 2 million b/d of refining capacity, upping its total capacity to nearly 12.5 million b/d by the end of the decade.

By the end of 2018, total crude import quota for independent, or teapot refineries, will grow to 2 million b/d.  That is an increase of about 500,000 b/d more than March of this year.

Chen said Asia is expected to account for about one-third of the global refining capacity by 2020 and will have to look beyond the Middle East and Africa for fuel supplies.

 

A secure supply and the optimization of supply are vital for Unipec.

“If every consumer goes to the Middle East and Africa we don’t know what will happen to the market. So we have to diversify,” he said.

Led by Brazil, Venezuela and Columbia, Chinese oil imports hit 1.3 million b/d in March.

Due to shrinking domestic production and surging imports, China’s crude oil deficit hit 15 million tonnes in March, not as high as the record 19 million tonnes in December of last year.

“Record imports are being driven by falling production, higher refinery runs, huge infrastructure and Strategic Petroleum Reserve builds,” Virendra Chauhan of consultancy Energy Aspects told Reuters . The agency anticipates Asia’s crude imports, led by China, to jump by 900,000 b/d on the year in 2017.

Teapot refineries prefer low-sulphur oil which is produced in the America’s, boosting Chinese imports from the region.  Increasing US shale output and production cuts by OPEC have made it more economical for traders to send large volumes of crude from west to east.

According to Reuters, next month, China will import its first Southern Green Canyon and Thunderhorse crude from the US.

During the first two months of 2016, Brazil overtook Venezuela as the top South American crude supplier to China. In 2016 China became the number three destination for US crude exports.

The Americas has the potential to become a “global trading hub” in the coming decade, Chen said.