China issued its first batch of crude oil import quotas for 2019 on Wednesday at a 26-per-cent lower volume than for the first batch a year ago, though expectations are for the volumes to climb later this year.
The Ministry of Commerce granted quotas totalling 89.84 million tonnes to 58 companies in its first allowances for 2019, according to four sources with direct knowledge of the matter and documents reviewed by Reuters on Wednesday. This is down from the 121.32 million tonnes issued in the first batch of allowances for 2018, although the sources said Beijing may increase the volume for 2019 in a second batch of quotas later this year.
Lower import quotas may signal slowing crude demand growth for the first half of 2019 in China, the world’s largest oil importer and second-largest oil consumer.
“The market, in general, does not have an upbeat outlook for imports. I think the drop in quota could likely mean easing growth in China’s crude imports in the first half,” said Zhou Guoxia, a crude-oil analyst with consultancy JLC.
Private refiners, also known as teapots, received quotas for 70.65 million tonnes of imports, more than 20 per cent lower than the first batch of quotas issued last year, according to the documents and Reuters data.
This followed lower consumption of the 2018 quotas, said Seng Yick Tee, analyst at Beijing-based consultancy SIA Energy.
Refiners only used 71 per cent of the quotas allocated between January and October, 2018, the period that the government used to determine quotas for the first batch of 2019, Mr. Tee said.
One of the four sources with knowledge of the quotas, who works for a private Chinese refiner, said they received about a third of its annual quota in the first batch and expects to get the remainder in a second batch, which Beijing usually issues around September.
Over all though, the start up of new refineries in China in 2019 is expected to raise crude imports to a record, adding 630,000 barrels a day of new demand, 7-per-cent higher than last year, according to SIA Energy.
“We don’t see any major impact on China’s overall crude imports in 2019 as the import growth is mostly contributed by mega petrochemical refiners and national oil companies’ refineries,” SIA Energy’s Mr. Tee said.
Dalian Hengli Petrochemical and Zhejiang Petrochemical, which are starting up new refineries in 2019, have each received quotas of four million tonnes, according to the documents reviewed by Reuters.
Dragon Aromatics, a petrochemical producer based in Fujian province, has also received import quota of 600,000 tonnes as it resumes operations at its condensate splitter, the sources said.