This build in floating storage is mainly due to the increase in the number of vessels waiting to unload on the Chinese coast. This comes as a consequence of the 55% increase (from 1.84 to 2.85 MMbpd) of independent “teapot” refineries imports quotas during the beginning of 2018, which is perceived as an opportunity by traders.

    • This was compounded with the onset of the maintenance season as well as the new anti-pollution taxes which resulted both in a decrease of crude demand and a reduction of run-rates.

    • To cope with the new taxes and meet the new regulations by 2020, several Chinese “teapots” are getting ready to blend their gasoline with ethanol to produce E10 fuel.

    • The independent refineries have been consolidating into one conglomerate to increase efficiency as they have historically shown low run rates (below 50% until the end of 2016) and have been struggling with bottlenecks at import ports.

    • Kayrros estimates the share of Chinese crude demand processed by Chinese
      “teapots” at 27% in early 2018.
  • Kayrros will continue to monitor the situation over the coming weeks.

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