China’s loadings of West African crude oil are set to rise to a new record in March as the nation stocks up on medium and heavy oil in the midst of OPEC production cuts, according to a Reuters survey of shipping fixtures and oil traders.
Some 1.41 million barrels per day (bpd) of West African oil are expected to load for China over the coming month, surpassing February and hitting a fresh high since Reuters began tracking the shipments in 2004.
China’s state-run Unipec led the pack, along with Sinochem, while the nation’s independent refineries, known as “teapots”, joined in by taking cargoes from trading houses such as Trafigura and Total.
The companies favoured Angola’s medium and heavy oil including Cabinda, Dalia, Nemba, Plutonio and Saturno, and will also take the first cargo of Angola’s newest oil grade, Olombendo.
Chinese buyers also booked Congolese Djeno, Ghanaian Jubilee and some cargoes of Nigerian oil, including Escravos and Qua Iboe.
Their buying has pressed the differentials versus dated Brent for Angola’s crude to unusually high levels, but some analysts warned that some cargoes could be headed for storage rather than immediate consumption.
“With seasonal turnarounds, they probably won’t be processing it now – they cannot digest it,” said Ehsan Ul-Haq, principal consultant with KBC.
He added that the buyers were tempted in part because of a still-narrow spread between Brent and Dubai crudes DUB-EFS-1M, which makes West African grades more competitive in Asia, but production cuts from the Organization of the Petroleum Exporting
Countries also led some to stock up.
OPEC’s compliance with a pledge to cut 1.2 million bpd of production this year rose to 94 percent last month, taking out mostly medium and heavy crude grades.
“OPEC cuts are now biting, and Asia is feeling the pain. And in Asia, the security of supply is important. They have always been willing to pay a higher price for security of supply,”Ul-Haq said.
Still, the keen Chinese buying was not enough to keepn overall West African flows to Asia supported, and the total figure slipped to 2.1 million bpd in March, down from 2.31 million bpd in February. Indian refineries booked just 14 cargoes to load in March, down from 18 in February. Buyers in Indonesia, Taiwan, Thailand and Malaysia also purchased smaller amounts of oil for March loading.
Source: Naija 24/7