China's Private Refiners Boost Middle East Oil Purchases

Independent Chinese refiners are capitalizing on lower-priced oil originating from the Middle East, following a surge in crude flows through the Strait of Hormuz. These companies have secured substantial shipments from key producers in the region, including Saudi Arabia and Iraq. In this context, Rongsheng Petrochemical purchased a shipment of Saudi crude in the spot market for July delivery. Shandong Chambroad Petrochemicals also acquired Iraqi Basra crude for August delivery, according to traders familiar with the matter. The traders added that Shenghong Petrochemical Group also secured a shipment of UAE’s Upper Zakum crude. This increased activity in oil offerings across Asia followed a resurgence in shipping through the Strait of Hormuz. This revival came after a temporary peace agreement between Washington and Tehran, and the issuance of a temporary waiver by the United States allowing the purchase of Iranian oil. Concurrently, both Saudi Aramco and Abu Dhabi National Oil Company (ADNOC) began marketing their crudes under more flexible terms, in an effort to boost their sales. It is noted that the mentioned companies – Rongsheng Petrochemical, Shandong Chambroad Petrochemicals, and Shenghong Petrochemical Group – did not respond to email requests for comment. Traders, who preferred to remain anonymous due to the sensitivity of the information, explained that many of the shipments sold by Aramco and Iraq were priced at discounts reaching up to $5 per barrel below Brent crude futures, for delivery to China. They indicated that these price levels are considerably lower than those for West African and Brazilian crudes, which typically serve as the primary source for these refineries in the spot market, particularly given the high cost of long-haul shipping. Furthermore, these discounts match, and perhaps even undercut, recent offers for Iranian crude.