China's new crude import quotas to boost seaborne inflows by year-end after destocking

China's new batch of crude import quotas for 2025 is expected to eventually boost the country's seaborne inflows by the year-end, following destocking activities from bonded storage, analysts, refining, and trading sources said Nov. 27.

The government likely has allocated about 7.4 million mt of new quotas to refineries in Shandong, Zhejiang, Liaoning, Jiangsu, and Henan provinces. The allocation would bring the total crude import quotas for 2025 to 203.36 million mt, up 6.38%, or 12.2 million mt, from 191.16 million mt in 2024, Platts, part of S&P Global Energy, reported earlier.

The 7.4 million mt of quotas must be utilized in 2025, which would translate into 1.55 million b/d of imports from bonded storage and cargoes in transit for the remainder of the year. Bringing crude barrels from onshore bonded storage requires quota consumption.

"Given the one-month timeline to utilize the crude import quota, most of the incremental quota is likely to be allocated for clearing volumes in bonded or floating storage near China's coast," said Wang Zhuwei, a director of oil trading research with S&P Global Energy, on Nov. 27.

"We have also been tracking an increased number of VLCCs waiting to discharge at Chinese ports since mid-October," said Sun Jianan, a senior analyst with Energy Aspects.

Before the allocation, China's independent refineries lifted their crude imports by 16.6% year over year to 163.23 million mt (3.94 million b/d) in January-October, comprising barrels that have been refined and stored, Platts data showed.

The accelerated import pace has led to low quota availability, limiting their imports in November despite crude prices falling significantly and keeping port stocks at high levels.

May slow prices fall

The move may slow the downward trend in Russian crude prices amid sanctions, trade sources added.

Offers for Russian ESPO Blend crude cargoes were at a discount of about $5.5-$6/b against ICE Brent crude futures on a delivered basis to China on Nov. 26, according to two Dongying-based refinery sources.

This marks a dramatic shift from the first half of October, when ESPO Blend crude was trading at premiums of $1.50-$1.80/b against ICE Brent crude, DES China, and a decline from a discount of about $3/b on the same basis in the first half of November.

In comparison, the price of Iranian Light narrowed slightly to a discount of around $7.0-$7.2/b against the ICE Brent Futures on a DES Shandong basis in late November, up slightly from a discount of around $7.5-$7.8/b in H2 November, the two Dongying-based refinery sources added.

"ESPO would be preferable to Iranian Light as the price differential between the grades has narrowed, making ESPO more competitive as a feedstock to produce gasoil, which is in good demand during winter," said a Shandong-based trader.

"There is quite a lot of crude available in the storage tankers in ports, also in floating storage around Shandong ports," said a trader in Shandong.

Commercial crude stocks in Shandong, the home of China's small independent refineries, stood at 147.78 million barrels as of Nov. 26, rising from 128.72 million barrels a year earlier, but lower than the record high of 157.16 million barrels seen in August, according to Kpler data.