Chinese import quotas maintain pressure on independent refiners.

Crude markets continued to creep higher, with ICE Brent Dec21 contracts trading at 84.8 $/b on early Friday. Despite a poor EIA weekly report, with crude inventory builds of 6 mb, and refinery maintenance work denting throughput by 650 kb/d w/w, crude prices and time spreads continued to rise globally. There are concerns about this week’s data quality, as the “unaccounted oil” balancing item of EIA’s methodology grew by 1.2 mb/d w/w mostly due to significant swings in the Gulf coast’s petroleum data, which partially explains the lack of reaction of the market. PADD2 and Cushing inventories were drawing at a steady pace despite lower refining runs.

Gasoil cracks continued to rally in Europe, with the ICE Gasoil crack reaching 14 $/b, the long-run average for the 2013-2019 period. ICE Brent spreads were valued at 71 cents, reflecting a smooth depletion of stocks globally, without any significant supply risk, as denoted by the Russian energy minister, Novak, in an interview yesterday. 

The Chinese government released their last batch of crude import quotas for 2021, at 14.9 Mt. This leaves the annual quotas for independent refiners at 177 Mt, which is markedly below 2020 levels, in an effort to curb private actors. Only newly built mega-refineries integrated with petrochemical plants were allocated flat or increasing quantities. It is therefore likely that Chinese imports will remain subdued for the end of the year, with lumpy variations at the start of 2022.

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