Russian oil giant
Rosneft is to sell up to 720,000 tonnes of fuel oil to oil major
BP,
Reuters reports.
BP is reported to have purchased the Russian M100 straight-run fuel oil at a premium of US$87 per tonne to the Singapore 180-centistoke benchmark in a tender issued by Rosneft.
According to industry sources, the high price of the deal means that it is anticipated that the fuel oil will be shipped to China's local 'teapot' refineries for processing, rather than be used by BP for blending.
Teapot refineries, which are mainly located in Guangdong and in the eastern Shandong province, use fuel oil as feedstock as they have limited access to crude oil. The use of cheaper feedstock enables them to compete with the state-owned refineries when producing products such as gasoline and diesel for the domestic market.
In recent years, China has raised the import tariff on fuel oil, which in turn has made it more difficult for teapot refineries to compete against the state-owned refineries.
Demand for fuel oil feedstock currently looks thin in China as refiners are already looking to reduce their production rates due to rising inventories of refined fuels.
Last year, five of China's top ten fuel oil importers were bonded bunker traders, according to data compiled by
ICIS. The five bunker trading firms listed were: China Marine Bunker (PetroChina) Co Ltd. (Chimbusco), Sinopec Zhejiang Zhoushan Petroleum Co., Shenzhen Brightoil, China Changjiang Bunker (Sinopec) Co. (CCBC) and PetroChina.
With a total of 6.05 - 6.25 million tonnes, up 10 percent on the previous year, Chimbusco was ranked as China’s largest fuel oil importer in 2012. Sinopec Zhejiang Zhoushan Petroleum Co, was second after importing 2.3 - 2.4 million tonnes, up almost 40 percent year-on-year.
