(Bloomberg) -- China has snapped up millions of oil barrels in a late buying spree as refiners plan to boost fuel exports through the end of the year.
Some of China’s biggest buyers have purchased at least 10 million barrels since late last week from the Middle East, West Africa and Brazil, according to traders participating in the market. The world’s top oil importer was initially subdued during the latest trading cycle, but the flurry of buying signals a ramp-up of Chinese consumption and a potential boost to global demand.
Cargoes are for arrival in December and January.
Beijing has encouraged refiners to ship as much fuel as possible by the end of the year after recently allocating a new export quota for oil products including diesel and gasoline. Refinery operating rates may climb by 4-5% in the final quarter from the previous three months, Xia Wenhong, an analyst with industry consultant OilChem, said during a webinar last week.
Strong seasonal demand for diesel has also boosted overall profit margins for processors, another factor supporting the increase in refining rates, said traders who take part in the Chinese market.
The trading arms of top state-owned oil companies China National Petroleum Corp. (PetroChina), China Petroleum & Chemical Corp. (Sinopec) and China National Chemical Corp. (ChemChina) have been among the buyers, according to traders. Independent refiner Shenghong Group also purchased crude from Abu Dhabi as the company ramps up its operations before starting this year.
“Independents will be driving the very near-term strength,” said Mia Geng, an analyst at industry consultant FGE in Singapore. Purchases by the the smaller private processors may not be reflected in the spot market because they are likely taking cargoes from producers including Russia and Iran, she said.
However, most crude purchased by state-owned refiners will likely only arrive in the first quarter of 2023, Geng said. FGE estimates China’s daily oil imports will climb above 11.5 million barrels in February. Inbound shipments were at 9.83 million barrels a day in September.
Optimism over Chinese demand has showed up in one key oil market indicator. The premium of Oman crude futures on the Dubai Mercantile Exchange over Dubai swaps strengthened to $4.42 a barrel on Wednesday, more than a dollar higher than a week earlier, according to data compiled by Bloomberg.
(Adds delivery dates in third paragraph, FGE comments in seventh, eighth paragraphs.)
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