Russia’s fuel-oil suppliers are on track for record exports to China this month as smaller refineries in the Asian nation increase the amount they use for blending.
Russian producers are set to sell over 350,000 barrels of fuel oil — a less valuable part of the barrel than gasoline and diesel — to China in May, according to data from the research firm Kpler.
Fuel oil flows into China surged after February when the price cap on Russian oil products took effect. The purchases have recently skyrocketed as Shandong province, home to most of the nation’s independent refineries, started conducting quality checks on bitumen mixture, another favorite feedstock.
“We anticipate that fuel oil inflows to China will remain high in May and will increase further from June,” said Jianan Sun, a London-based analyst with Energy Aspects Ltd.
China’s teapots were allocated a lower crude import quota in the first two batches of 2023, compared with last year, meaning they need to rely on other feedstocks such as fuel oil for their processing needs.
Russian refiners will likely increase supply of high-sulfur straight-run fuel oil and distillate-rich M100 grades into Asia by as much as 140,000 barrels a day in the coming weeks as they finish maintenance of facilities, Energy Aspects’ Sun added.
Russia now supplies some 35%-40% of all fuel oil imported by China, according to Viktor Katona, an analyst at Kpler.
China’s buying binge may not persist as authorities set an annual quota system for non-state plants to import fuel oil.
For 2023, the allocation is steady at 16.2 million tons, of which over half could have already been used up as of end-April, according to Energy Aspects’ Sun. The government is scheduled to release April oil products imports figures on May 20.
