Oil Grades Favored by China’s Independent Refiners Get a Boost
(Bloomberg) -- Oil grades popular with China’s independent refiners are getting a boost in the physical market amid speculation authorities are about to allocate more import quota.
Spot differentials for Russia’s ESPO crude are up by at least $1 a barrel from last month, while Brazilian varieties such as Tupi and Iracema are also fetching higher prices than in August, said traders who asked not to be named.
The private processors -- also known as teapots -- started to return to the spot market late last month as plants came back online after scheduled maintenance. Jiangsu Eastern Shenghong Co.’s new refinery in Lianyungang was then granted a permit last week to import crude, spurring speculation among traders the next batch of import quotas was imminent. They may be allocated by the end of September, Energy Aspects Ltd. said earlier this month.
The increased activity from the teapots -- which account for around a quarter of refining capacity in the world’s biggest crude importer -- should aid the global oil rally that’s run into headwinds since the end of June. Purchases by the independents and refining had slowed earlier in the year as Beijing cracked down on the sector in a bid to curb pollution and close tax loopholes.
The market is now waiting to see whether the buying spree will have a spillover effect into the Middle Eastern spot market, with November-loading barrels yet to start trading.
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