China Extra Fuel Oil Quotas Supportive of Rising Teapot Rates

Further on China fuel oil import quota increase of 3mn mt for non-state run enterprises taking 2023 levels to 19.2mn mt.

• Fuel oil import quotas differ from those for oil and oil products with companies required to apply for the fuel oil import quotas cargo by cargo until the annual volume is hit, in a first-come-first-served manner according to Platts
• The quota relates to barrels used as feedstocks rather than those imported for bunkering purposes.
• Strong refiner margins, cheap Russian volumes and tightening crude quotas saw China pull in 19.2mn mt of fuel oil in the first 10-months of 2023 based on customs data – double the volume in the same period last year (not all of this volume counted towards quotas.)
• “In November, around 15 cargoes totaling 15.5 million mt of fuel oil arrived for independent refineries, up 123% from 695,000 mt in October.” Platts reported.
• A Shandong based analyst told Platts that at least 1mn mt of fuel oil is due to arrive in December on top of the November volumes.
• “Without the quotas, the independent refineries pay about Yuan 10/mt ($1.37/mt) to procure imported fuel oil via state-run trading houses.” Platts reports.
• The extra quota is expected to be price supportive for China related fuel oil import grades such as those from Russia.
• OilChem reported last week Shandong teapots raised rates to 57.56% of capacity in the week to Nov. 23 – the first gain in 8-weeks.