In Freight News 01/05/2015
The trading unit of China’s biggest energy company amassed a record volume of Middle East oil in October amid the collapse in prices. As crude now caps its best month since 2009, it’s on another spree.
China National United Oil Co. bought 55 crude cargoes, or 27.5 million barrels, this month for June loading on a Singapore trading platform, according to a Bloomberg News survey of traders. That surpasses the previous high reached in October when Chinaoil, as the company is known, bought 47 cargoes in the so-called window by Platts, a unit of McGraw Hill Financial Inc.
The company’s April purchases on the system, where trades, bids and offers determine benchmark commodity prices used in deals around the world, are twice the amount that China’s refineries use in a day. The nation’s crude processing rose to a record pace last month, and it’s expected to make available more capacity to store emergency stockpiles later this year.
“Refinery runs in China are expected to remain high at more than 10 million barrels a day moving forward,” Tushar Tarun Bansal, senior oil consultant at FGE in Singapore, said by phone. “These barrels can be easily absorbed by refineries on such high runs.”
Qu Guangxue, a Beijing-based spokesman for China National Petroleum Corp., the parent company, didn’t respond to two calls to his office seeking comment.
Crude Refining
In the Platts platform, so-called partial cargo deals must be combined into one 500,000-barrel shipment when the same buyer and seller trade 20 of the 25,000-barrel lots in a single month. The seller can choose to supply Dubai, Upper Zakum or Oman crude to the buyer.
Chinaoil will load at least six Upper Zakum shipments and 49 Oman cargoes in June, survey data compiled by Bloomberg show.
“June-loading cargoes will arrive in July, in time for refining in July-August,” Bansal said. “Refinery margins are currently high and expected to remain that way in the short term.”
Prices of benchmark West Texas Intermediate crude have jumped about 24 percent in April on signs a shale boom that’s contributed to a record U.S. supply glut is ending. They slumped almost 50 percent last year and reached the lowest level in six years last month as Saudi Arabia led the Organization of Petroleum Exporting Countries to refrain from cutting output even as the U.S. pumped supplies at the fastest pace in more than three decades.
WTI futures were trading up 24 cents at $58.82 a barrel on the New York Mercantile Exchange at 6:12 p.m. Singapore time.
Emergency Stockpiles
As oil dropped, speculation increased that China is taking advantage of lower prices to accelerate purchases for filling its strategic reserves. Chinaoil’s buying spree in October was probably aimed at boosting the nation’s stockpiles, consultants including IHS Inc. said at the time.
“Talk of Chinese strategic reserves being filled are hard to ascertain and highly speculative, though part of the purchases could be going there,” FGE’s Bansal said.
On the Platts window, traders report bids, offers and deals through e-mails, instant messages and phone conversations in a defined period, which are then used to create end-of-day price assessments for various commodities.
Bloomberg LP, the parent of Bloomberg News, competes with Platts and other companies in providing energy-market news and information.
