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China fuel oil: Buying interest from teapot refiners continues tightening supply

China fuel oil: Buying interest from teapot refiners continues tightening supply

Teapot refiners in eastern China's Shandong Province continued to show buying interest for imported fuel oil as feedstock, following a severe clampdown on refineries that try to avoid paying consumption tax, sources said Thursday. "We are looking to purchase some straight-run fuel oil cargoes, but haven't found any suitable offers, as supply in the market is very limited," said a source with the 3.5 million mt/year Jingbo Petrochemical refinery. Imported straight-run fuel oil cargoes were seen offered at premiums of around $95-110/mt to the Mean of Platts Singapore 180 CST high sulfur fuel oil assessment, the source added. These fuel oil cargoes are likely of European origin and are blended in the floating storage tanks offshore Malaysia, market sources said. Some teapot refineries preferred to import these grades as they could pay for it on a 90-day Letter of Credit basis which allowed them enough time to take loans from banks, they added. East China-based petrochemical producer Luqing Petrochemical has been receiving one to two 90,000-mt cargoes of this grade of fuel oil each month since August, sources said. The premium for the Russian straight-run fuel oil grade, however, was even higher and attracted little buying interest, said sources. A source from the 3 million mt/year Xinhai Petrochemical company which had received a 40,000-mt cargo of M100 fuel oil last month, said the price was MOPS 180 CST HSFO assessments plus around $110/mt. For November-delivery cargoes this would be too high, he said. "The premium of around $105/mt is acceptable," he added. M100 TENDER RESULTS AWAITED The market was also awaiting results of Russian state-owned oil company Rosneft's 2015 term tender offering M100 fuel oil. Rosneft has offered up to 2.8 million mt of M100, in cargo sizes of 42,000 mt, from its Angarsk, Achinsk and Komsomolsk refineries on an FOB Nakhodka or Vanino basis through the tender. It also offered up to 430,000 mt of fuel oil from the Angarsk refinery, to be delivered to the CPT railway station on the Sino-Russian border via another tender. Both tenders closed October 7, and bids -- priced against the monthly average Mean of Platts Singapore 180 CST high sulfur fuel oil assessments -- are to remain valid until November 14. "It is believed that the tender price would be much lower this year, as demand has been quite weak," said a source from the 3.3 million mt/year Qingyuan Petrochemical company. The refinery imported slightly less than 500,000 mt of M100 fuel oil this year via rail from Russia. VENEZUELAN 380 CST SUPPLY ONLY FOR DEC, ASPHALT IN DEMAND There was no supply left of Venezuelan 380 CST straight-run fuel oil for November delivery, said the Qingyuan Petrochemical source, adding only December-delivery cargoes could be booked now. Asphalt was still being sought in the market, despite strict review by Shandong tax offices on the consumption tax rebate on oil products, said sources. While it has become more difficult for teapot refineries to claim their purchases of asphalt as fuel oil, it was still a cheap feedstock and many refineries use it in the crude distillation units and then process it further in coking units, said sources. Some use asphalt only in coking units as well, they added. The 1 million mt/year Zibo Xintai is expected to receive a 50,000-mt asphalt cargo at Longkou port in end November. The cargo cost around Yuan 3,700-3,800/mt, according to a source from the company, which mainly runs asphalt as a feedstock for its coking units. "The import cost of asphalt is comparatively low [versus imported 380 CST HSFO]," said the source. The 3 million mt/year Yuhuang Petrochemical was also heard to have signed a six-month supply deal for around one 90,000-mt/month of asphalt with a local company. The supply was heard to have started from July this year. >>

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