China’s independent refineries boost their imports of fuel oil blended from Russian barrels, to use as low cost feedstock due to their lagged crude oil import quotas.
Western sanctions on Russia including an embargo on February 5 and price caps on refined products resulted in Russia moving to sell its oil to Asian countries with tempting discounts.
The offered discount on fuel oil blends increased independent refiner profits and replaced crude oil that some companies could not import due to limited quotas from the Chinese government.
The last traded blended fuel oil was $5 cheaper than the benchmark ICE Brent that delivered to Shandong.
China’s total imports ramped up by 1.76 million tonnes in December, the highest since September 2021.
The surge was aided by an increase in shipment from Malaysia of 620,000 tonnes, a more than one-year high, while direct fuel oil imports from Russia dropped to 187,000 tonnes in December after reaching its peak of 554,000 tonnes in October. Total Russian imports were more than doubled to 3.1 million tonnes in 2022.
Outlook still continues with the EU’s sanction on February 5, while the Europe natural outlets remain closed, and Asia continues to take advantage with the cheaper price of Russian barrels.
Western trading houses were the main suppliers of shipment fuel oil to China, according to sources that tracked the flow of shipment. They predicted that the increased level in December would continue into February and beyond.
Another top supplier said that many companies had become more relaxed about facing Russian barrels after the emergence of confusion with the Group of Seven price cap and the risk that could happen from sanctions.