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Sources: China’s refineries buy oil at cheap prices amid plentiful supplies

UNITED STATES (OBSERVATORY NEWS) — A number of private refiners in China are snapping up supplies of crude after prices drop, betting that they have reached their lowest levels and that demand in China may recover from an outbreak of the Corona virus in the coming months.

Refiners have been absent from the market for weeks since the Lunar New Year holiday in late January, according to eight insiders.

Private refineries, known in the industry as “teapots”, reduced production by at least 1.5 million barrels per day after the outbreak due to declining fuel demand in China, which led to an increase in crude and fuel stocks.

“They take advantage of the opportunity of cheap prices, no more … the demand is still very weak,” a refinery source said.

Private refineries account for a fifth of China’s crude imports.
“They (private refineries) are likely to bet on the outlook in the market, believing it is the bottom,” said a source dealing with buyers from China.

A trader at a Chinese company said sellers were losing between three and four dollars a barrel because they bought the shipments in January and booked the tankers when the freight cost was high.

Sources said that the demand for state-owned refineries, which all cut production, remains weak.

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