Chinese oil refiners are now buying crude from West Africa and Brazil, as a drop in long-distance freight rates has lowered transportation expenses, Bloomberg reports, referencing market sources. The agency observes that this has expanded supply alternatives as competition for Russian oil intensifies.
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As reported by traders engaged in the transactions, refiners acquired oil from these remote areas at a premium of $15–20 per barrel above the Brent benchmark for delivery to China in December. One independent Chinese refinery has acquired a shipment of oil from Brazil, according to the agency.
In the last two months, the cost of Russia’s ESPO crude—shipped from the Far East—has surged significantly, according to Bloomberg. Supply interruptions, driven by conflicts between the U.S. and Iran, have spurred higher demand from India and leading Chinese oil firms. At the end of September, ESPO was priced at a $30 per barrel premium over Brent; traders mentioned that this premium has now decreased to $20. In comparison, the premium was only $5 at the close of August.
According to Bloomberg, the cost of long-distance maritime transport has decreased because of rising oil exports from the Persian Gulf, despite ongoing navigation risks in the Strait of Hormuz. Earlier, Asian refiners redirected their sourcing to oil from the Atlantic Basin, resulting in increased transportation expenses. With supplies rising, they are once more reverting to Middle Eastern crude.
According to Bloomberg, oil sourced from Brazil and West Africa may help independent Chinese refineries, which are currently facing very low profit margins and have historically depended on Russian imports and inexpensive Iranian oil. The agency determines that these refineries have had to pursue other options after a maritime blockade imposed by the U.S. on Iranian ports restricted their access to inexpensive feedstock.
source: bloomberg.com
