China's crude oil imports reached its highest record at an average of 9.61 million barrels a day in October, Reuters reported, Reports showed that the independent refiners, the teapots, drove the increase as they aim to fulfill their quotas before they expire.
According to the report, the total October volume of imports reached 40.80 million tons. The independent refiners imported around 8.22 million tons out of the total import volume. The total teapot import is lesser than the forecast made by S&P plats last month. The prediction is expecting that the teapots imports will reach nine million tons. The teapot import in October is significantly lower than the independent Chinese refiners' total imports in September amounting to 7.26 million tons.
China announced last month that they will increase the oil import quota for its non-state refiners by 42 percent for 2019 as an effect of a new refinery capacity planned to be imposed on next year's operation. These non-state refiners are mostly compost of independent refiners. The increase insured the stability in demand. However, it is only temporary since OPEC and Russia are convening to discuss the possibilities of cutting production due to expectations of excessive supply.
According to the Ministry of Commerce, the independent oil companies are now allowed to apply for up to 202 million mt of crude oil import quotas in 2019. The increase is 41.8 percent higher than the target of 142.42 million mt that the Chinese government originally set for 2018.
China is also reported to change its sources of crude. As the trade war between China and the United States escalated, China's intake of US crude dropped significantly. It was reported that a few months ago, Refineries in China stopped importing U.S. oil completely because they anticipated that tariffs will be imposed on the products. Contrary to doubts, China did not impose tariffs on U.S. oil. According to a CNBC report, Chinese refineries resumed importing US oil. The volume of imports, however, remained unclear and it is anticipated that it is much lower than the volume being imported before the trade war.
Reports are circulating that China is also importing Canadian oil to supplement their usual consumption of crude oil. The discount given by the Western Canadian Select to Texas Intermediate attracted Chinese bargain hunters. It is expected that the trend will continue until prices in the global markets stabilize.
