Chinese “tea” refineries are heading to buy Middle East oil .. What is the reason?

Two Chinese independent lines made an unusual step in the international oil market, by buying shipments from the Middle East crude for delivery next month.

According to familiar people who asked not to disclose their identities, both the “Fuhai” and “Shaanxi Yanchang Petroleum” in China in China in China bought about a million barrels of Emirati breast crude. People indicated that the deals took place through Chinese and international companies.

Current deals are immediate shipments because the current trading cycle focuses on laptops in July, while these deals are dedicated to delivery in June.

Why did the refineries prefer the Middle East oil?
The opinions of customers differed on the motives of purchase, as some indicated that the abundance of supply in the Middle East allows the price of cheaper oil, while others attributed the reason to the high cost of fuel oil. The two companies did not respond to the suspension requests.

Small Chinese refineries known as “tea jugs” usually buy cheap oil from Iran and Russia, and fuel oil is used as an initial material. But this polluted fuel is currently trading with an unusual price allowance compared to the global standard, and the tax campaign launched by Beijing has increased the cost of importing it.

Refining activity in China
“Fuel oil is no longer economically feasible as a preliminary material now. With good refining margins, independent refineries take advantage of this opportunity to buy additional crude to increase operating rates,” said John Joh, chief oil market analyst at Sparta Commodities in Singapore.

KPLER data showed that in April China imported about 12 million barrels of heavy fuel oil and diesel, which is the lowest level since September 2023. The data of the company “Oilchem” company showed that refining rates in Shandong Province, in which the “tea” refineries were concentrated, witnessed an increase since late February in preparation for the high summer demand.

According to customers, “Fuhai” and “Yanchang” bought marqan shipments with a bonus of about $ 5 a barrel over Brent crude futures for August on the Intercontinental Exchange.