Brazil overtakes Russia as biggest exporter to small Chinese refineries as trade war slashes US imports
Brazil overtook Russia as the biggest supplier of crude oil to China’s independent refineries last month, as the trade war with the US transformed global oil supply lines.
Crude shipments from the South American country hit 2.17 million tonnes in February, overtaking Russia, however they were down 5.4 per cent from January, data from S&P Global Platts shows.
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It comes as Brazilian suppliers, including Petrobras, ramp up Chinese exports to replace a fall in US supply during President Trump’s trade war.
“This is because of a political decision … the imports of US crude into China dropped to zero in the last four or five months,” Georgi Slavov, head of research at Marex Spectron, told City PM
Despite talks of a slowdown amid trade tensions, Chinese demand is strong, and larger refineries are still turning towards more traditional sources in the Middle East for their crude, Slavov said.
Small Chinese refineries were only granted permission to import their own crude in the last few years, and set their equipment up to refine high-quality US light crude. When supply dried up, they turned to Brazilian producers to fill the light crude gap.
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However, it will take a lot longer for the larger refineries to switch their capacity to refining light crude, if they do it at all, Slavov said.
“The US will not stop pumping out their own crude and this crude has to go somewhere and because it’s cheaper and better quality than many other blends it will start displacing other crudes,” Slavov said.