Page 9 - AsianOil Week 08

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The sources said the suspensions were for revolvingcreditlinesaswellascreditsguaranteed by a letter of credit (l/c) from a Chinese bank.
“All our applications for new open-account credits are frozen ... these clean credits are piv- otal,aswebuy6-8mnbarrelsofoileachmonth,” Reuters quoted one trading executive as saying.
The head of one Shandong refiner’s Singapore operation told the newswire: “We were told by our banks that so long as the open-account cred- its are for oil heading to Shandong, it will be very hard chance [of] winning approvals.”
A senior Greater China trade finance banker at an international global bank said the industry was concerned over the impact that weakening Chinese fuel demand was going to have on refiners’ balance sheets and thus their ability to repay debt.
The source said there was an excess of oil products in storage and questioned the teapots’ need for new credit. He said: “They don’t have enough storage to get fresh crude supply. Things are not going to pick up in a very big way in the
next couple of months, so demand for refined oil inthemarketisnotgoingtogothroughtheroof.” State-owned China National Petroleum Corp.’s (CNPC) research institute has said domestic fuel demand is expected to fall 35.7% yearonyearinthefirstquarterof2020,creating a surplus of 27.08mn tonnes in the local market. China’s demand slowdown is projected to lead to a surge in fuel exports this quarter as companies attempt to dump their stockpiles. Gasoil exports are set to hit 2.2mn tonnes in February, up from January’s 1.335mn tonnes, Reuters said in a separate February 25 report,
citing Refinitiv data.
“We now see post-Chinese New Year, total
clean product exports are at 156,000 tonnes per day, versus 139,000 tonnes over the same period last year, up 12% y/y,” commodity data firm Kpler’s head of market analysis, Alexander Booth, told the newswire.
Consultancy SIA Energy, meanwhile, said oil product exports were projected to rise by 58,000 bpd, or 3.9%, y/y in the first quarter.™
South Korea leans more heavily on US oil
POLICY
SOUTH Korea’s imports of crude oil from the US more than doubled in 2019 as refiners sought to diversify their supply portfolios and 2020 is expected to follow a similar trend.
The Asian country’s imports of US crude climbed 126% year on year to 17.79mn tonnes (357,000 barrels per day) in 2019 from 7.87mn tonnes (158,000 bpd) in 2018.
South Korea’s imports are projected to expand nearly 20% y/y in the first quarter to 38.57mn barrels (429,000 bpd), Reuters reported on February 24, citing Refinitiv data.
South Korean buyers are buying US crude at a discount to oil sold by the Asian country’s biggest supplier, Saudi Arabia. Reuters said South Korean buyers were paying on average $1.70 per barrel less for US oil, a marked change from the $0.97 per bar- rel premium they were paying in 2018.
“The US WTI crude discount against Dubai crude was steep last year. As Middle East crude OSPs are high because of OPEC supply cuts, we expect US crude to keep coming,” Korea Petroleum Association official Cho Sang-bum told the newswire this week. Cho added that South Korean importers also benefitted from
government rebates of about $2.11 per barrel on freight charges by diversifying supplies beyond the Middle East. South Korea’s free trade agree- ment (FTA) with the US also means the latter’s oil exports do not carry a tariff, while Middle Eastern crudes carry a 3% duty.
Energy Aspects analyst Stephen Wolfe said: “It is economically more attractive, and trade companies, midstream [firms] and producers have been aggressive seeking out buyers for American crude in Asia. Light sweet [crude] is attractive in [South] Korea as a substitute for Iranian South Pars, espe- cially in petrochemically integrated plants, and especially after the implementation of IMO 2020 [shipping rules].”
The International Maritime Organization (IMO) mandated that from 2020 ships must not use fuel containing more than 0.50% sulphur from January 1.
An unnamed US crude exporter told the newswire: “These barrels are going to continue to move and it’s going to be OPEC’s problem. They hate it because shale’s breakeven price is below the general breakeven price for OPEC.”™
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