China refiners buy more Brazilian, W. African crude as sanctions, tariffs disrupt supply
- China's Brazilian crude imports could hit an eight-month high in February
- Saudi crude to China to fall in March after price surge
- Yulong snaps up Brazilian and WAF crude for March, April delivery
Chinese refiners have stepped up purchases of Brazilian and West African crude as they reorganize sourcing around sanctions and tariff disruptions, and after prices of Middle Eastern grades surged.
Tougher U.S. sanctions on Russia and Iran, as well as Beijing's new import tariffs on U.S. oil in response to duties imposed by President Donald Trump, have disrupted trade patterns and lifted costs for the world's top crude importer.
China's crude imports from Brazil will pick up in the second half of February and full month volumes could hit 3 MM tonnes (t), or 800,000 bpd, the highest in at least eight months, said Vortexa senior analyst Emma Li.
Kpler data showed a 49% month-on-month increase in Brazilian crude and a 36% month-on-month rise in Angolan crude for China's expected imports this month.
More cargoes from those regions are expected in March and April given the risks and uncertainty over sanctioned oil, according to traders and analysts.
China's newest refiner Shandong Yulong Petrochemical, due to the start of its 200,000-bpd crude unit in March or April, recently bought a large volume of Western African crude for March arrival, loaded in late February or early March, trade sources said.
Yulong bought a total of four shipments of Angolan oil including Dalia, Plutonio and Girassol and one cargo of Nigerian Nemba, all for March delivery, according to a trader with knowledge of the transactions.
The refiner also bought two April shipments of Brazilian crude, they said.
State trader Unipec bought more than 20 MMbbl of Brazilian crude for April delivery, a separate trade source said.
The enhanced appetite for Brazilian and Western African crude has pushed up premiums by about 50% since the U.S. sanctions on January 10, and comes as refiners seek to avoid Gulf crude due to high prices, said traders.
Saudi Arabia, the No.2 crude supplier to China after Russia, hiked its crude prices for March shipments to the highest in more than a year.
Chinese buyers will take less crude from Saudi Arabia in March, a tally of allocations from market sources last week showed.
"Chinese refineries that are not exposed to fuel oil import tariffs and reductions in fuel oil consumption tax rebates continue to see healthy margins," said June Goh, a senior oil analyst at Sparta Commodities.
"In order to capitalize on this, they will be looking for crudes that are non-sanctioned and Brent-related to capture the narrow Brent-Dubai spread," she added.
Beijing's 10% tariffs on U.S. crude imports also make Brazilian Tupi and West Africa options for Chinese buyers after maxing out Canadian TMX grade purchases, said Goh.
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