China refiners boost Iraqi, Qatari oil buys to replace dwindling Iranian supply

At least 12 million barrels bought from Iraq, Qatar - traders Iranian floating storage more than halved since late July -Kpler Chinese independent refiners curb run rates as margins weaken By Siyi Liu and Chen Aizhu SINGAPORE, Oct 6 (Reuters) — Chinese independent refiners have stepped up purchases of crude from Iraq and Qatar for October and November delivery to replace dwindling Iranian supplies, as exports from other Gulf producers through the Strait of Hormuz recover, traders said. Strong demand for non-sanctioned Gulf crude from private refiners has helped support the market after supply disruptions linked to the US-Israeli war with Iran.

Chinese refiners bought at least 12 million barrels of Iraqi and Qatari crude from trading houses Mercuria, Totsa and Trafigura, according to three traders close to the deals. One estimated total purchases at 15 million to 20 million barrels. The cargoes were sold at premiums of $12 to around $20 a barrel to the ICE Brent benchmark on a delivered basis, the traders said. Most of the purchases were Iraqi Basra Medium and Heavy crude, among the cheapest Middle East grades available.

Buyers included Hongrun Petrochemical, Qicheng Petrochemical, Qirun Petrochemical, Hualong and Chambroad Petrochemical, the sources said. Iraqi oil has become the new benchmark for China's independent refiners due to its ample supplies and promptness, one trader said. Hongrun and Shenchi Petrochemical also bought 3 million barrels of Qatar's al-Shaheen crude for arrival in early November, the sources said, speaking on condition of anonymity because they are not authorised to speak to media. The refiners did not immediately respond to requests for comment amid a holiday in China.

Mercuria and Trafigura declined to comment. TotalEnergies did not immediately respond to a request for comments. The deals followed purchases of more than 20 million barrels of crude from West Africa, Canada and Colombia between late August and early September as Iranian supply dwindled after the US imposed a naval blockade on Iranian vessels in July. Iranian Supply Falls China's independent refiners have relied heavily on discounted crude from sanctioned producers, particularly Iran, in recent years.

But China's imports of Iranian oil nearly halved in September from a year earlier to 590,000 barrels per day, the lowest level since January 2023, according to data from analytics firm Kpler. The volume of Iranian crude stored on vessels outside the blockade zone has more than halved to 45 million barrels from 100 million barrels in late July, Kpler said. Its data showed that Iran did not export any crude in September for the first time since Kpler began tracking flows from the producer in 2013.

Refining Margins Weaken As exports through the Strait of Hormuz recover, trading houses have lowered offer prices to stimulate demand from Chinese independent refiners, one trader said, adding that buyers were unwilling to pay spot premiums above $20 a barrel. Refinery utilisation rates in Shandong fell to about 55% by the end of September from nearly 60% at the start of the month, according to consultancy Horizon Insights, as margins deteriorated after China capped fuel price increases while crude feedstock costs surged. 58) per metric ton by late September, compared with profits of about 500 yuan per ton in early September, according to Horizon.

7045 Chinese yuan renminbi) (Reporting by Siyi Liu, Chen Aizhu and Trixie Yap in Singapore. com;)