The amount of oil stored floating in Asian ports is growing, with Iranian and Venezuelan crude cargoes earlier this month raising Asian floating inventories to a three-month high, according to data from energy intelligence provider Kpler, as quoted by Bloomberg.
The exception follows China’s crackdown on independent refineries – the so-called teapots – which have come to account for a solid share of total Chinese crude imports. This year, however, Beijing has turned to independent refiners with claims of tax evasion, investigations into environmental violations and production brakes amid excessive fuel production that has pressured the margins of all the country’s refiners.
This environment in China suggests that the 62 million barrels of crude oil – per Kpler – found in Asian ports last week will have trouble finding a home.
“These barrels in Southeast Asia are distressed,” Anoop Singh, head of oil research in East Suez at Braemar ACM Shipbroking, told Bloomberg. “They will have a hard time finding homes other than China, unless the situation surrounding US sanctions changes drastically or China’s restriction on its independents is reduced.”
However, the reduction in independent refiners was not the only factor that contributed to the excess. China also introduced additional taxes on imports of some petroleum products that immediately damaged demand for these products, which included bitumen mixing. Bloomberg noted that the mixture is often used to mask Venezuelan and Iranian oil loads, and that now that demand for bitumen has fallen, the loads remain unsold.
Vortexa data show that there were 29 oil tankers idling in Chinese ports, and a fifth was believed to be loaded with Iranian and Venezuelan crude oil, as China is the main destination of the two sanctioned countries. Crude oil imports into China fell for the second month in a row in July, a sharp 20% year-on-year, according to the latest customs data quoted by Nikkei Asia.
By Irina Slav for Oilprice.com
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