OREANDA-NEWS. September 05, 2013. China's fuel oil imports in July were flat from a year earlier, at 1.87 million mt, amid sustained weak demand for the fuel, detailed data released last week by the General Administration of Customs showed.

The volumes refer to the fuel oil classified as No. 5-7 by China's customs department.

Traders on Monday said demand for fuel oil in China remained weak in July and while import schedules from some sources were unchanged from previous months, more cargoes were sent into storage.

"Bonded storage volumes have been high in China in the past two months," said a domestic trader.

Russia was top supplier of fuel oil in July, with volumes rising 21.9% year on year to 545,045 mt. They were however 15.8% lower than in June.

Traders for the straight-run 180 CST fuel oil, known in Russia as M100, said demand was weak, prompting some cargoes to go into bonded storage tanks. A trader from Singapore-based Daxing, which is a major company trading M100, said the company had stored some cargoes in July on weak demand. Another trader, Shandong Tianhong New Energy, was also heard to have sent its M100 purchases from BP into bonded storage tanks in Shandong.

Venezuelan cargoes plunged 40.5% year on year last month to 332,012 mt. Traders at Chinaoil, the major importer of Venezuelan 380 CST fuel oil, said demand for the cargoes was very weak in July and the company had to resort to storing more volumes in bonded storage.

Kazakh fuel oil imports into China totaled nearly 81,000 mt in July, versus just 13,900 mt a year earlier. Vitol was confirmed to have sold one cargo of 80,000 mt Kazakh-origin 180 CST straight-run fuel oil into East China last month, traders said.

UAE imports moderated to over 90,000 mt in July, compared with 332,000 mt in June, when traders said some volumes of Iranian-origin were likely to have been masked as coming from the UAE to circumvent challenges posed by western sanctions on oil sales by Iran.

TEAPOT REFINERY RUNS UP SLIGHTLY

Imported fuel oil in China is used mainly by small, teapot refineries.

Shandong province in East China has the highest concentration of teapot refineries, with refining capacity totaling about 104 million mt/year (2.09 million b/d), according to Beijing-based energy information provider JYD Commodities Hub.

According to JYD data, average refinery run rates in Shandong rose by two percentage points to 41% utilization in July from June. Its survey of 35 refineries showed they consumed about 3.5 million mt of feedstock, comprising 2.21 million mt of crude oil and 1.29 million mt of imported fuel oil.

JYD had said earlier this month that trade sources expected China's July fuel oil imports into Shandong to be muted because of high inventories and increased use of crude as a feedstock.

The small refineries can crack domestic crude and straight-run fuel oil, but due to the limited availability of these feedstocks, they rely on imports. They buy crude from state-owned Sinopec, PetroChina, China National Offshore Oil Corporation as they do not have crude import licenses themselves, topping up their feedstock with straight-run fuel oil, primarily from Russia and Venezuela.