Chinese private refiner Hengli Petrochemical has been buying crude from the Middle East, according to six traders familiar with the situation, mainly from TotalEnergies after the French major accumulated a large volume of oil and as Iranian supplies to China tightened.
These purchases follow Hengli obtaining an additional crude import quota of 2 million tonnes (14.6 million barrels) which can be used in 2024 and 2025.
In late November, Hengli Petrochemical bought about 12 million barrels of Middle Eastern crude from Totsa, the trading arm of TotalEnergies, as well as PetroChina and Aramco Trading Co, according to some traders familiar with the transactions.
The barrels, which include grades such as Qatari al-Shaheen, Iraqi Basrah Medium and Upper Zakum from the United Arab Emirates, are due to be loaded in December and January, said the traders, who declined to be named due to the sensitivity of the affair.
The supply of Iranian crude to China has fallen since October, reducing rebates for sanctioned oil to their lowest level in about five years, pushing some independent refiners to return to more expensive non-Iranian oil from the Middle East. despite battling low margins, traders said.
The slowdown comes amid expectations that US President-elect Donald Trump will step up sanctions against Tehran when he returns to office in January and further squeeze Iranian oil exports, which account for more than 10 % of crude purchases from China, the world’s largest oil buyer.
A Dalian-based Hengli executive in charge of crude oil procurement and planning confirmed that the refiner had increased its purchases of Middle East cargoes thanks to its extra quota and attractive prices, but it denied ever purchasing crude from Iran.
“We recently received new quotas and the market is favorable to us, so we have purchased cargoes that are good value for money,” the executive said, declining to be named because he is not authorized to speak to the media.
Linking Hengli’s recent purchases to the drop in Iranian supply is “pure speculation”, the Hengli leader said.
Reuters reported in July that Hengli had become a buyer of Iranian oil earlier this year, with a high-level trade source close to the company saying it had bought 4 million barrels a month in the first few months of the year. Another senior trading source close to Hengli estimated volumes at between 4 million and 6 million barrels per month.
Data analytics firm Vortexa said at the time that Hengli was buying cargoes of Iranian crude, based on its tanker tracking and analysis information.
TOTAL SALES
Hengli’s purchases help reduce the oversupply held by Totsa after its unusual two-month buying spree under S&P Global Platts’ pricing process, known as the “window”, said traders.
TotalEnergies was the top buyer in the Platts window for Middle East oil cargoes loaded in December and January, snapping up a total of 23.5 million barrels, according to trade data reviewed by Reuters. Its last purchases in the previous window date back to June, for a total of 4 million barrels of crude loaded in August, according to the data.
Traders believe Totsa still holds several million barrels after its recent purchases.
TotalEnergies did not respond to a request for comment.
IRAN OIL
Last week, Washington designated other vessels and entities for their involvement in facilitating Iranian oil trade, following a similar measure taken in October.
One of the ships, the very large crude carrier (VLCC) Phonix, has been anchored outside the port of Rizhao in Shandong province, China’s independent refining hub, since last week, according to data from monitoring of LSEG ships.
In late 2019, China’s independent “Teapot” refiners became the main buyers of discounted Iranian crude, filling the void left by Chinese state oil companies fearing US sanctions, saving billions of dollars on the import bill of the country’s oil and cementing China’s status as Tehran’s leading crude market.
Chinese banks have recently refused to facilitate payments for Iranian oil purchases as the number of sanctioned vessels increases, three separate traders who handle Iranian crude said.
“It is becoming increasingly difficult because even if you transfer oil from a sanctioned tanker to an unsanctioned vessel, the latter quickly risks being placed on the sanctions list,” said one of the three traders. .
