China swoops in on Cana­dian oil that’s $50 be­low U.S. crude

Tehran Times - - ENERGY -

Chi­nese oil buy­ers are mak­ing a bee­line for a bar­gain across the Pa­cific.

With Cana­dian oil over 60 per­cent cheaper than U.S. bench­mark West Texas In­ter­me­di­ate and global marker Brent, China’s re­fin­ers are be­ing lured to the heavy, sludgy crude. That’s be­cause -- apart from be­ing a source of fuel -- it’s rich in bi­tu­men, a black residue used to build ev­ery­thing from roads to run­ways and roofs.

China’s de­mand for the ma­te­rial is ex­pected to in­crease as Pres­i­dent Xi Jin­ping’s govern­ment fo­cuses on in­fra­struc­ture con­struc­tion in a bid to re­form the world’s sec­ond-big­gest econ­omy. With the avail­abil­ity of other bi­tu­men-yield­ing oil va­ri­eties such as Venezuela’s Merey shrink­ing, the Asian na­tion’s re­fin­ers are turn­ing to al­ter­na­tive sup­plies to feed the build­ing boom at home.

One of their op­tions is Cana­dian crude, prices for which are tum­bling as ris­ing pro­duc­tion runs into pipe­line bot­tle­necks and main­te­nance work cuts re­fin­ery ca­pac­ity at reg­u­lar buy­ers in the U.S. Mid­west. In the rest of the world, oil is surg­ing as im­pend­ing Amer­i­can sanc­tions squeeze Ira­nian ex­ports and an eco­nomic cri­sis hits Venezue­lan ship­ments. Fears are ris­ing that OPEC will strug­gle to ease a loom­ing sup­ply crunch.

“The pol­icy of boost­ing in­fra­struc­ture in­vest­ment has been bullish for bi­tu­men,” said Li Hain­ing, an an­a­lyst with in­dus­try con­sul­tant SCI99 in China’s Shan­dong prov­ince. “The sup­ply of the Merey grade has been dis­rupted since May, push­ing re­fin­ers to look else­where. As late-Septem­ber and Oc­to­ber is tra­di­tion­ally the peak sea­son for con­struc­tion projects in China, de­mand will be fur­ther sup­ported.”

China bought 1.58 mil­lion bar­rels of Cana­dian crude for load­ing in Septem­ber, al­most 50 per­cent higher than the 1.05 mil­lion bar­rels in April, data from cargo-track­ing and in­tel­li­gence com­pany Kpler show. State-run re­finer Cnooc Ltd. has char­tered a tanker, Nord­tulip, to load oil from Van­cou­ver in Oc­to­ber, ac­cord­ing to ship­ping fix­tures.

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