Chinese refiners are ramping up their purchases of Brazilian and West African crude as they navigate the complexities of sanctions and tariffs affecting global oil supply. This shift comes in response to surging prices of Middle Eastern grades and tougher U.S. sanctions on Russia and Iran.
Key Highlights:
Increased Imports:
China’s crude imports from Brazil are expected to rise significantly in the second half of February, with full month volumes projected to reach 3 million metric tons (approximately 800,000 barrels per day), the highest level in at least eight months, according to Vortexa analyst Emma Li.
Data from Kpler indicates a 49% month-on-month increase in Brazilian crude imports and a 36% rise in Angolan crude for February.
Future Expectations:
Traders and analysts anticipate more cargoes from Brazil and West Africa in March and April due to ongoing risks and uncertainties surrounding sanctioned oil supplies.
New Refinery Activity:
Shandong Yulong Petrochemical, China’s newest refiner, is set to launch its 200,000 bpd crude unit in March or April and has recently secured several shipments of West African crude for March delivery, including four shipments of Angolan oil and one Nigerian cargo.
State Trader Activity:
State trader Unipec has reportedly purchased over 20 million barrels of Brazilian crude for April delivery, reflecting the heightened demand for these alternatives.
Price Dynamics:
The increased appetite for Brazilian and West African crude has led to a 50% rise in premiums since the U.S. sanctions were implemented on January 10. This shift is partly due to refiners avoiding Gulf crude because of elevated prices.
Saudi Arabia’s Pricing:
Saudi Arabia, the second-largest crude supplier to China after Russia, has raised its crude prices for March shipments to their highest levels in over a year. As a result, Chinese buyers are expected to reduce their crude imports from Saudi Arabia in March.
Market Strategy:
According to June Goh, a senior oil analyst at Sparta Commodities, Chinese refineries that are not subject to fuel oil import tariffs are seeking non-sanctioned crudes to capitalize on healthy margins. The move towards Brazilian and West African crude is also a strategic response to Beijing’s 10% tariffs on U.S. crude imports.