Russia’s fuel oil suppliers are on track for record exports to China this month as the Asian nation’s smaller refineries increase the amount they use for blending.
Russian producers will sell more than 350,000 barrels of fuel oil, a less valuable part of the barrel than gasoline and diesel, to China in May, according to data from research firm Kpler.
Fuel oil flows to China increased after February, when the price cap on Russian oil products took effect. Buying has recently surged as Shandong province, home to most of the country’s independent refineries, began conducting quality controls on bitumen mix, another preferred raw material.
“We expect China’s fuel oil inflows to remain high in May and increase further from June,” said Jianan Sun, a London-based analyst at Energy Aspects Ltd.
China’s teapots were allocated a lower crude oil import quota in the first two batches of 2023 compared to last year, meaning they have to rely on other raw materials such as oil for their processing needs.
Russian refiners are likely to increase supplies of high-sulfur fuel oil and distillate-rich M100 grades to Asia by up to 140,000 bpd in the coming weeks as they complete facility maintenance, Sun d added ‘Energy Aspects.
Russia now supplies 35% to 40% of all fuel oil imported by China, according to Viktor Katona, an analyst at Kpler.
China’s buying binge may not persist as authorities set up an annual quota system for non-state plants to import fuel oil.
For 2023, the allocation is flat at 16.2 million tonnes, more than half of which could already be used up by the end of April, according to Energy Aspects’ Sun. The government plans to release April oil product import figures on May 20.
