Page 9 - FSUOGM Week 18

FSUOGM PIPELINES & TRANSPORT FSUOGM
Russian Urals oil exports to China hit record in Q1
CHINA
Urals has grown in popularity despite its higher transport cost compared to Russia’s ESPO grade.
CHINA received a record volume of Russian Urals oil in the rst quarter, Argus reported on April 30, acquiring over 4mn tonnes (322,000 barrels per day) of the grade.
Urals is mainly sold in Europe, while most of the Russian oil bought by China is ESPO grade, produced in Eastern Siberia and shipped to the country via pipeline and ports in the Far East. Urals, on the other hand, can only be sent to China via tanker, at a considerably higher trans- port cost.
Urals shipments to China in the nal quarter of 2019 totalled just 2.5mn tonnes, according to Argus. e previous record for shipments was set in the third quarter of 2018, when supplies reached 2.7mn tonnes.
Around three-quarters of the Urals bought by China from January to March arrived at the country’s northern ports of Qingdao, Jinzhou and Tianjin, according to Argus. e country’s north was less a ected by coronavirus (COVID- 19) lockdowns earlier this year, and it is also home to many small-sized independent re ner- ies, dubbed teapots.
Most of these teapots buy their oil on the spot market, rather than under long-term contracts. is makes them more likely to make sudden shi s in their buying habits, such as expanding purchases of Urals grade.
Urals imports to China totalled 2.3mn tonnes in January but fell to 520,000 tonnes in February, when the epidemic was at its height in the coun- try. Demand for the grade recovered to 1.2mn tonnes in March and more than 2.1mn tonnes in April. is meant that almost a quarter of all
Urals exports via tanker went to China.
Urals deliveries picked up in late March and April as a result of COVID-19 lockdowns com- ing into force throughout Europe, the main mar- ket in which it is sold. e slump in European demand led to Urals trading at a record discount to ESPO, increasing the grade’s attractiveness to
Asia-Paci c buyers.
Total shipments
China’s overall purchases of Russian crude soared in March as the country’s refineries sought to capitalise on bargain basement pricing.
The country imported 7.02mn tonnes (1.68mn barrels per day, bpd) of oil from Rus- sia, according to data published by the General Administration of Customs (GAC) published on April 26. Reuters’ calculations showed that this represented a 31% increase year on year.
While China’s overall imports for the month expanded by 4.5% y/y to 41.1mn tonnes (9.72mn bpd), the country’s largest supplier actually saw its market share slide. Purchases from Saudi Arabia fell by 1.6% y/y to 7.21mn tonnes (1.7mn bpd).
Bloomberg quoted unnamed officials on April 30 as saying that the country’s re nery run rates amounted to 13mn bpd in April, almost the same as 2019’s monthly average and a signi cant rebound from February’s daily average of 9mn bpd.
e spike in imports is understood to have been mostly driven by the teapot re ners, which are looking to capitalise on the Saudi-Russian oil price war.™
Week 18 06•May•2020 w w w . N E W S B A S E . c o m P9