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China’s oil buying binge to run on in 2021 as tank operators, refiners stock up

China’s oil buying binge to run on in 2021 as tank operators, refiners stock up thumbnail
FILE PHOTO: A China Ocean Shipping Company (COSCO) vessel is seen near oil tanks at the China National Petroleum Corporation (CNPC)’s Dalian Petrochemical Corp in Dalian, Liaoning province, China October 15, 2019. REUTERS/Stringer

China’s oil buying binge to run on in 2021 as tank operators, refiners stock up

Energy & Environment

Chen Aizhu
Muyu Xu
Gavin Maguire

SINGAPORE/BEIJING (Reuters) – China’s commercial oil stockpiling sector, which emerged as a key swing buyer of crude as prices plunged earlier this year, is setting plans to grow again in 2021, supporting a further boost in imports.

Private tank farm operators, refiners and traders pumped an extra 310-600 million barrels of oil into storage in China this year, according to a survey of five analysts, more than a month’s usage in the world’s second-largest oil consumer.

The buying helped prop up global oil markets as the coronavirus slashed demand, and delivered big profits for operators, traders and refiners who were able to stock up cheaply. While oil prices have partly recovered, they remain below historical levels.

Graphic – Global oil demand by region during Q2 and Q3 2020:

“Given how lucrative the storage business is in 2020, everyone will try to boost their storage capacity,” said Liu Yuntao, China analyst with Energy Aspects.

Private refiners and storage operators will put about another 100 million barrels of new tanks to use in 2021, according to interviews with six top storage operators and data from company and Chinese media reports.

With Chinese demand a key factor for crude markets — along with output curbs by major producers and how quickly global fuel demand can recover from the pandemic — more storage can potentially boost flows into the country.

PRIVATE PLAYERS LEAD

China’s oil storage has traditionally been driven by state-owned companies and the country’s Strategic Petroleum Reserve (SPR), but private firms have taken an increasing role over the past four years after small, independent refiners were allowed to import oil.

Private refiners, storage firms and port authorities accounted for nearly half of this year’s inventory build, analysts said.

“Non-state storage build has become a bright spot this year, and the trend will continue as the government lowers thresholds for private firms to participate,” said Chen Lin, a senior manager at Jinggu Energy, a private storage operator based in east China’s oil hub Zhoushan.

Graphic – China’s crude oil stockpiling mix:

As well as chasing arbitrage opportunities, tanks can be leased out to refiners and traders, helping to smooth the supply chain inside China after heavy congestion at some key ports this year delayed tanker unloading, said analysts.

The planned new tank builds for 2021 compare with expanded tank space of about 110 to 140 million barrels this year, according to SIA Energy and Energy Aspects.

The new tank space is concentrated in China’s eastern refining hubs in Shandong and Zhejiang, and in northeastern Liaoning.

Independent refiners Hengli Petrochemical and Shandong Hongrun Group, commodity trader Shandong Huaxin Industry & Trade Group and port operators at Qingdao, Rizhao and Zhoushan on the east coast have emerged as the key players in China’s commercial storage sector.

Satellite images comparing 2020’s storage footprint at key locations to the same site in 2018 show how sharply tank capacity has increased.

Graphic – Map image showing oil tank space at Shandong Huaxin’s tank farm in Rizhao, China:

Hengli Petrochemical more than doubled its storage space in 2020 to 43 million barrels, while Shandong Hongrun Group is currently China’s single largest storage operator with nearly 82 million barrels of space, mostly in Weifang, Shandong.

Graphic – Map image showing oil storage tank space at Hengli’s refining complex in Dalian, China:

Shandong Hongrun, which counts global traders Vitol, Mercuria and BP as clients, added 22 100,000 cubic meter tanks this year, and plans to add another 28 next year, totalling 17.6 million barrels, a company official told Reuters.

Graphic – Map image showing Hongrun’s oil tank farm in Weifang of Shandong, China:

Yantai port expects to build an additional 7.6 million barrels of storage by August next year, while Qingdao port is planning an additional 3.8 million barrels after building 10 million this year.

Overall, China’s crude oil imports are expected to grow 6%-8% in 2021, following 10% growth in the first 10 months of 2020, to near 12 million barrels per day, according to Energy Aspects’ Liu and Paola Rodriguez-Masiu at consultancy Rystad.

Beijing has boosted quotas for non-state buyers and purchases will also be underpinned by new refining units added by firms like privately-controlled Zhejiang Petrochemical Corp and Shenghong Petrochemical Corp, as well as expansions at Sinopec Corp plants.

Oil shipment data tracked by Refinitiv shows China is on course to import 339.5 million barrels of crude oil in November, which would mark a new record. That compares to 293.1 million in October and 293.8 million in November 2019, the data showed.



3 Comments on "China’s oil buying binge to run on in 2021 as tank operators, refiners stock up"

  1. Outcast_Searcher on Sun, 22nd Nov 2020 1:11 pm 

    Given how the vaccine outlook is shaping up, and how China is already handling the virus (post Wuhan mess, of course), it seem to me that the profit motive is clear: Buy low, sell high. So bumping up purchases for storage before oil creeps up $10 or $20 as global recovery becomes more obvious makes lots of sense — for those willing to take on some risk.

  2. Theedrich on Mon, 23rd Nov 2020 6:42 pm 

    The U.S. continues its murder of the world. The masses could not care less, just so long as they continue to get their bread and circuses.  In 2013, former NSA and CIA agent Edward Snowden revealed the bottomless corruption of the American government.  Fearing for his life, he fled to Russia, a country viewed as the Evil Empire by the Democrat syndicate and the DeepState.  Similarly, a few years later British police, at the command of the American government, later invaded the Ecuadorean embassy in London and took WikiLeaks founder Julian Assange captive in order to surrender him to U.S. secret police.  The media and big-tech vermin quickly diverted public attention from that and from their complicity in the catastrophe the syndicate and the elites are plotting for the planet.

    There was one reason and one reason only for the U.S. government’s pursuit and persecution of these two men:  they had exposed the clandestine criminality, fraud, lies, mass murders by drone, participation in drug dealing, wars for profit, elite theft of taxpayer money, installation of lower primates in place of Whites and, in short, the utter corruption of the American Empire from top to bottom.

    At the same time that it pretends concern about global ecology, the Yankee squid is wrapping its tentacles around the earth and sucking the life out of it.  Everything is kept hidden from the masses, and the attention of the proletariat is directed toward the Great Satan, President Donald Trump, who has sought to free us from the Davos elites who own 99% of the allegedly “free” world — the same elites who are designing a global Gulag archipelago for all who question their omniscience and authority.

    But the media extension of the Democrat and DeepState syndicates, with their fraudulent “news” and censorship of anti-Leftism, now control over half of the electorate.  The vulgus is deluded and defrauded by the morally diseased print and TV outlets.  Meanwhile the quasi-cadaver at the top of the heap, with his mild scolding of his party’s anarchist rioters, is promoting lawlessness as a means to greater power for the anti-White Left.  As a result, the only thing left is the collapse of the rotted structure called America.

    Thus not just China’s success, but the coming plunge of U.S. energy resources will together be a world-saving event.

  3. FamousDrScanlon on Mon, 23rd Nov 2020 9:44 pm 

    Trump is no threat to the Davos elite. He is part of them

    There is much that Trump does that is welcomed by the attendees of this elite corporate gathering

    “Trump manages to be both the gasoline and the fire; he emboldens the very corporate hegemons who are committed to destroying the few protections remaining for the working class and poor.”

    https://www.theguardian.com/commentisfree/2018/jan/26/donald-trump-davos

    By all means continue to tell yourselves that right-wing oligarchs & corporate management are on the side of Joe-six pack.

    They’re your friends who live selfless lives for the betterment of you & yours & every single conservative 1% was totally opposed to globalization & they plan to share the trillions in profits they got as a direct result of globalization with you & yours… any day now.

    Like the good lord above, they love you.

    There’s a fatal shot of fentanyl with your name on it. Don’t delay.

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