The overall impact on China’s crude demand should be short-lived as traders re-route cargoes to other ports
[BEIJING] US sanctions on a key Chinese oil import terminal are redirecting crude flows and threatening run cuts at several state-owned refineries.
Last week’s blacklisting of the Rizhao Shihua Crude Oil Terminal, which handles about 9 per cent of China’s crude imports, could force run cuts of up to 250,000 barrels a day at a handful of refineries near the port in Shandong province, analysts from Energy Aspects said in a research note. Several refineries owned by state-run Sinopec are likely to be hardest hit as they’re connected to the facility by pipeline.
Targeting Rizhao and other port infrastructure represents an escalation of the US crackdown on those involved in the China-Iran energy trade, beyond just restricting independent refiners known as teapots that often rely on cheaper oil to eke out margins. The Rizhao terminal is partly owned by Sinopec through its subsidiaries, and is the refiner’s biggest entry point for foreign crude.
A spokesperson for Sinopec, officially known as China Petroleum & Chemical, did not immediately comment on any impact the sanctions might have.
Tankers already appear to be changing course to avoid the terminal. Spherical – which is carrying about two million barrels of Brazilian crude – switched its destination from Rizhao to Caofeidian in Hebei province on early Monday morning, according to tanker-tracking data compiled by Bloomberg.
The blacklisted terminal operator imported more than one million barrels a day last year, with Iran accounting for about 189,000 of that, data from Kpler show.
Sinopec’s 200,000 barrel-a-day Luoyang refinery is expected to be hardest hit, as it relies heavily on crude oil supplied via a pipeline from the terminal, according to Energy Aspects. Other Sinopec refineries such as Yangzi and Jinling, which are connected via pipeline to Rizhao port, could also face supply disruptions.
“The main impact falls on state-run refiners that receive non-sanctioned crude through the terminal, as sanctioned oil accounts for only about less than 25 per cent of the terminal’s crude imports,” said Emma Li, a senior market analyst at Vortexa.
The overall impact on China’s crude demand should be short-lived as traders re-route cargoes to other ports, Energy Aspects said. BLOOMBERG
