The commissioning of a new Chinese oil refinery is fueling a rally in heavy crude markets just weeks after prices bottomed out.
China’s state-owned PetroChina, which owns the new plant, is tapping oil supplies from Canada, Colombia and Ecuador after sanctions cut off access to the muddy, sulphurous Venezuelan oil it was originally designed to process . PetroChina’s parent China National Petroleum Corp. took control of the project after Petroleos de Venezuela SA pulled out.
PetroChina pledged to take at least 8 million barrels of Canadian, Colombian and Ecuadorian crude to be loaded next month, people with knowledge of the situation said. Canada’s Cold Lake variety is being offered on the U.S. Gulf Coast at a discount of about $11.50 a barrel to benchmark ICE Brent, two of the people said.
This is a big change from earlier this year, when the discount was more than $20 in the export market. Colombia’s flagship crude, Castilla, sold at a $12 discount to May cargo, a tighter spread than April’s $14 less.
The end of the US refinery maintenance season and tighter supplies from Venezuela and Ecuador are also supporting prices, the people said.
PetroChina’s Guangdong petrochemical complex in Jieyang, which began testing in October, is now ramping up. It can process 400,000 barrels per day and can run entirely on heavy oil.
Photo credit – iStock.com/RonFullHD
