Thursday , January 18 2018

China ‘teapots’: The new importers of oil – ‘Price of the barrel will depend on future growth and demand for oil’

They appeared in Singapore two weeks ago to contract and attempt to buy 2.5 million barrels per day, which is the official quota of oil imports granted to them by the government.

Teapots are the new oil traders that are trying to find a place in the Chinese oil market in order to become the largest importer of oil – 8.8 million barrels per day. They have a current refinery capacity of 12 million barrels, which will reach 18 million in a few years and could lead to huge surplus of petroleum products in the coming years.

The independent Chinese importers have signed some deals for the import of crude oil including from Kuwait. They are trying to compete with the government-owned companies and trying to find their niche in the market, such that this huge industry will be the biggest importers as well as consumers in the world.

With their presence and their attempt to secure some exports deals with the USA shale oil producers, which are seeking new buyers for their oil, they now seem to be marking their presence as consistent suppliers far from the main oil producers in the Arabian Gulf region. They are giving the new potential buyers the security of supply and sweet type of crude oil at competitive prices alongside international transparently-quoted prices.

The Singapore oil conference was very different this year. The price of barrel was the only topic discussed during the conference. About 75 percent of them believe the oil prices will not go forward this year or next to reach $60 level.

The main concern was focused on OPEC members and how long they can sacrifice their volumes and investments for the sake of shale oil and whether they can remain united.

Meanwhile, some stated that the current growth, demand for oil from China, and the current OPEC reduction cuts could lead to some imbalance in the market mainly due to lack of investments of more than $1 trillion by international oil companies. This could lead to hardening of the price of a barrel without exceeding $70 level. Yet, this still is not good enough to create some sort of cash surplus for OPEC countries.

The price of the barrel will depend on the future growth and demand for oil. If it can jump over two or three million barrels by 2019, then the China teapots and shale oil producers will be the ones to benefit the most from the Singapore meeting, as both exporters and importers will survive for years to come.

email: naftikuwaiti@yahoo.com

By Kamel Al-Harami – Independent Oil Analyst

 

 

Check Also

The hard fact

THE optimism in the oil producing nations as the oil price hovers above $60 a …

Translate »