Queues of tankers have formed in China’s busiest oil ports while ships are waiting to dump crude oil for refineries that are rapidly boosting production as fuel demand soars.
According to ship brokers and tracking data, two dozen or more tankers loaded with crude oil are waiting to be unloaded at terminals on the east coast of China that supply state and independent refineries in the region. Asia’s largest economy is leading to a recovery in oil consumption, with demand in May almost returning to the level it was at before the Corona virus triggered orders.
Chinese refineries are stepping up their efforts to convert more crude oil to gasoline and diesel after the factories reopened and millions of people returned to work after the restrictions were relaxed. Government policies that mandate that the retail price of fuels not be lowered in line with less than $ 40 a barrel of oil have also increased refining margins in the country.
“China’s recovery in demand and currently low oil prices have prompted refineries, particularly independent companies, to boost crude oil prices,” said Serena Huang, a Singapore-based analyst at Vortexa Ltd., an analyst. when the refineries’ appetite remains strong. “
See also: Rising prices for China’s favorite crude oil show a resurgent demand
The tanker fleet arrived in Chinese waters in the second half of May and, according to Bloomberg, the ships left ports in Shandong and Liaoning provinces. Most of the ships are Suezmaxes and Very-Large Crude Carriers, which together transport about 4 million tons or more oil from countries like Russia, Colombia, Angola and Brazil.
Shandong is home to the Qingdao and Rizhao terminals, as well as China’s independent refineries – so-called teapots – which have recovered in a V-shape. Run rates rose to a record high of around 76% in late May, compared to a low of 42% in February, according to industry consultant SCI99.
In the meantime, the queues could get longer, with the highest number of super tankers having been transporting crude oil to China from almost anywhere in the world since at least early 2017. VLCC charter rates on the Middle East to China route (TD3C) rose to a three-week high in late May based on data compiled by Bloomberg.
“Low oil prices will also support strategic storage,” said Anoop Singh, head of tanker research east of Suez at Braemar ACM Shipbroking in Singapore. “This will certainly worsen the congestion in China’s ports.”
(Adds ship charter prices in the 7th paragraph.)
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