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CHINA DATA: Independent refiners likely to cut May fuel oil imports amid low margins

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Highlights

April imports rise 10.5% on month to 2.03 mil mt

Weak margins seen impacting buying interest

Jan-April imports jump 43% on year

China’s independent refiners are likely to cut their fuel oil imports in May amid weak cracking margins and higher import costs, after volumes reached a fresh high in April, refinery and trade sources told S&P Global Commodity Insights on May 9.

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Independent refiners, mostly in eastern Shandong province, had hiked their feedstock fuel oil imports to 2.03 million mt in April, the highest since June 2021 when S&P Global started collecting their import data.

Imports were higher in the backdrop of relatively higher demand for competitive feedstocks and lower availability of crude import quotas in 2024, sources said.

These imports were cleared under two harmonized system codes — 27101922 for residual fuel oil and 27101929 for other fuel oil barrels, which are distillates or mixed with residual.


However, imports are likely to drop in May, as buying interest has been dampened by the relatively high import costs, which are being led by higher Mean of Platts Singapore strip value, sources said.

In April, the monthly average of 380 CST fuel oil MOPS strip was $494.818/mt, up 7% from $462.307/mt in March, according to data from S&P Global.

As both the premiums and the MOPS strip values were high for the cargoes that arrived in April, the buying interest for future cargoes has dampened, an independent refinery source said.

The lower buying interest comes despite the easing of premiums in the recent trading cycle for cargoes to arrive in June.

Russian M100 fuel oil for June arrival was heard at a premium of around $85/mt against the MOPS 380 CST HSFO assessment, which was lower from $100/mt on the same basis a month earlier, according to independent refinery sources.

Iranian 280 CST fuel oil, meanwhile, was also lowered at around $15-$20/mt on the same basis, compared with $20-$25/mt in early April, sources said.

With the monthly average of 380 CST fuel oil MOPS strip remaining low at $427.533/mt in January and $428.929/mt in February, increased buying was prompted in the past months.

However, as the margins for cracking fuel oil remain thin, the buying appetite has been discouraged, sources said.

“It has been at a loss for refineries to crack fuel oil either in crude distillation unit or in cokers, considering the current cost,” the source added.

Imports rise further in April

In April, fuel oil imports rose 10.5% from the three-month high of 1.83 million mt in March to 2.03 million mt, according to S&P Global data.

Of the total, around 1 million mt of fuel oil was imported from Russia, up 36% from a month earlier. This included the supply of M100 fuel oil and volumes from the west of Russia.

The rest 1 millionmt was imported as Malaysian origin. These barrels included Iran 280 CST fuel oil and a few Iranian crude cargoes that were declared as other fuel oil under the 27101929 HS code, sources said.

The April fuel oil imports brought the year-to-date volume to 6.1 million mt over January-April 2024, up 43% from 4.27 million mt during the same period a year earlier, the data showed.

Over January-April, combined fuel oil imports accounted for 9.8% of the total feedstock portfolio — comprising crudes, fuel oil and bitumen blend –up from a portion of 6.3% a year earlier.

In contrast, the portion of bitumen blend against the whole feedstock portfolio fell to 4% during the same period, from 7.6% a year earlier.

Both fuel oil and bitumen blend are supplement feedstocks for independent refiners, especially for those without crude import quotas and with insufficient crude import quotas.

China has so far allocated a total crude import quota of 185.12 million mt across 34 refineries for 2024, taking into consideration the latest batch for the new Yulong Petrochemical. In comparison, the government issued 185.28 million mt of quotas to the refineries across four batches in 2023, including one batch issued in mid-December.

S&P Global collects information from trade and independent refinery sources, Kpler, shipping brokers and port sources, S&P Global Commodity at Sea, and the information has been confirmed by sources with knowledge of the matter.

Feedstock imports for China’s independent refiners (000 MT)








Apr-24 Mar-24 Change Apr-23 Change
Crude 12,281 15,063 -18.5% 14,026 -12.4%
Bitumen Blend 300 500 -40.0% 626 -52.1%
Fuel Oil* 2,027 1,834 10.5% 1,591 27.4%
Total feedstock 14,608 17,397 -16.0% 16,243 -10.1%








Jan-Apr 2024 Jan-Apr 2023 Change
Crude 53,519 58,491 -8.5%
Bitumen Blend 2,509 5,145 -51.2%
Fuel Oil* 6,101 4,267 43.0%
Total feedstock 62,129 67,903 -8.5%

* Imports cleared under HS codes 27101922 and 27101929

Source: S&P Global Commodity Insights

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