Singapore —Crude oil imports by Chinese independent refiners are expected to rebound marginally in August, on lower maintenance shutdown and an improvement in refining margins.
NowAround 7.4 million mt of crude is estimated to discharge in August at ports in Tianjin and Shandong provinces -- home to the country's independent refineries -- compared with 7.38 million mt in July, a survey by S&P Global Platts showed.
Qingdao port is expected to see deliveries rise by about 400,000 mt to around 3.3 million mt, offsetting an anticipated decline of about 200,000 mt at Yantai port, according to port sources.
Monthly crude imports by the independent refiners have averaged 8.18 million mt in the first seven months of 2018, with volumes hitting a low of 5.78 million mt in June.
The anticipated rise in crude imports stemmed mainly from the restart of 31.7 million mt/year of capacity across around 10 independent refineries in August, from turnarounds that started in July.
This sharply offsets a combined 5.7 million mt/year capacity to be shut by Qirun Petrochemical and Lanqiao Petrochemical for maintenance during August.
"Total feedstock demand in August will definitely be higher from July levels due to lower maintenance schedule," said an analyst in Shandong.
Following the resumption of operations, independent refineries' run rates are likely to recover to around 59% towards the end of the month, from an average of 52.5% in July, said an analyst with local information provider JLC.
RISING REFINING MARGINS, LOW PORT STOCKS
Meanwhile, rising gasoil prices have also encouraged refineries to lift throughput, boosting feedstock demand, sources said.
The price of Phase 5 gasoil in Shandong market has increased to Yuan 7,000/mt ($1,014/mt), from around Yuan 6,700/mt at the end of July, following higher international crude prices.
Moreover, crude oil stocks at ports were low, which would prompt refiners to start replenishing stocks in order to prepare for restart.
Feedstock inventories at major ports in Shandong fell 13% to 4.71 million mt as of July 26, from the record high of 5.42 million mt in end-June, JLC data showed.
Major ports in Shandong refer to Qingdao, Dongjiakou, Longkou, Laizhou, Rizhao, Dongying and Yantai.
REPLACING MEREY CRUDE
Separately, independent refiners are looking at substitute crude grades to Venezuelan Merey 16 crude as feedstock for asphalt production.
Merey crude shipments from Venezuela have been falling due to the country's political situation. State-run PDVSA was committed to exporting 1.2 million b/d of Merey crude in July, but the company was only able to meet about 44% of that commitment, Platts reported previously.
Canada's Cold Lake crude and Access Western Blend, as well as Kuwait Export crude are a few possible alternatives.
A cargo comprising 80,000-100,000 mt of Cold Lake is expected to arrive around August 14-15 for Hongrun Petrochemical.
Chambroad Petrochemicals has also imported Cold Lake for asphalt production, instead of Merey.
The refiner has imported around 1.87 million mt of Merey and Boscan crude over January-July, accounting for about 27% of total imports by the independent sector in that period.
Dongming Petrochemical has been the second biggest buyer of Venezuelan crude among independent refiners. It imported about 732,000 mt of Merey and diluted crude oil from Venezuela in January-July.
As a replacement to Merey crude, Dongming Petrochemical has taken a VLCC cargo of Kuwait Export Crude for arrival later this month.
AWB is also seen as an option for the production of asphalt. Sinoenergy, the sole importer of all Canadian crude in the first seven months of the year, has sold most of its Canadian cargoes to refineries for asphalt production.
"AWB has been used for asphalt production successfully," a company source said. AWB has a gravity of around 21 API and sulfur content of about 3.8%.
