China's 2017 Crude Oil Quotas Exceed Last Year's, Teapots Take A Cut
China last week issued a second batch of crude oil import
quotas under the so-called "non-state trade" that is
higher than for all of the allowances in 2016, but
allotments to independent refineries were lower than a
The lower grants to the independents dealt the new group
of crude oil buyers another blow because they were already
barred from exporting refined fuel, squeezing margins in
an oversupplied domestic fuel market.
The Ministry of Commerce approved 22.92 million tonnes to
32 companies, against 29 recipients in the first issue for
2017, according to a document dated June 14 and viewed by
Reuters on Monday.
The 32 companies included mostly independent oil
refineries, also known as teapots, and some state-run
That latest quotas take the total issued this year to
91.73 million tonnes, compared with 87.6 million tonnes in
2016. The second batch will be valid until year-end.
Volumes for the 19 independent oil plants that make up two
thirds of the total issues for 2017 dropped by 12.36
million tonnes, or nearly 17 percent, from last 2016.
"The message is pretty clear: the government is tightening
the screws as the industry is heavily oversupplied," said
a Beijing-based trading executive who deals with
"Those who have not played by the rules, under-using
quotas for instance, are taking a bigger cut."
Four independents -- Baota Petrochemical, Wonfull
Petrochemical, Haiyou and Chambroad -- took the deepest
cuts, between 43 percent and 90 percent, according to data
Reuters compiled based on official documents.
Uncertainties over the time and the size of issues have
led some independents to scramble for purchases, resulting
in brimming fuel stocks and port congestion.
"We are rushing to buy as much crude as we can because we
thought the government is going to issue second batch of
quotas based on the volumes (used) in the first half of
the year," said a trader with Shandong Wanda Group, owner
of Tianhong Chemical.
"That led to higher running rate as we don't have enough
storage ... and in turn a glut of refined products."
The Ministry of Commerce did not immediately respond to
request for comment.
Company officials at five independent refiners told
Reuters that they have received a second batch of crude
Beijing approved the oil quotas under the "non-state
trade" designation, so they do not include state-owned oil
companies Sinopec, China National Petroleum Corp, Sinochem
Group, China National Offshore Oil Corp and Zhuhai
The increased quotas buoyed the price of Oman crude on the
Dubai Mercantile Exchange to its narrowest discount
against Dubai swaps in four sessions. China buys most of
Oman's crude output.