Oil tanker cluster off China grows

Bloomberg

The cluster of oil tankers off China’s coast is growing and the vessels are waiting longer to offload their cargoes amid a lack of onshore storage space after a buying spree earlier this year.
The number of oil-laden tankers parked in Chinese waters has swelled since the start of the month with almost 200 ships expected over the course of June, according to vessel-tracking information compiled by Bloomberg and data intelligence firm Kpler. Crude imports surged to a record in May as demand rebounded after the easing of lockdown restrictions.
The congestion illustrates the explosion in purchases by Chinese refiners as the country re-opened after shutting down to contain the coronavirus. The rush for cheap crude is overwhelming port infrastructure and storage amid an influx of cargoes from the Middle East, Latin America, Russia and West Africa.
China’s oil demand rebounded rapidly from
the demand destruction wrought by the outbreak, but there are concerns about a possible second wave of infections after new cases emerged in Beijing. However, Chinese crude imports are expected to expand further this month, with Kpler estimating overseas shipments could reach more than 14 million barrels a day. That would be a jump of over 20% from the record set in May.
At least 32 vessels are sitting off the coast, up from around two dozen earlier in the month, with one ship that arrived in May set to take more than four weeks to discharge its full cargo due to limited tank space. That compares with a typical pre-virus wait time of around five days for a ship to offload.
Almost half of the waiting tankers are Very-Large Crude Carriers, while the rest are smaller Aframaxes and Suezmaxes. Vessels have arrived at ports including Qingdao, Rizhao, Yantai, Tianjin and Yingkou, according to ship-tracking data and broker reports. The VLCC New Journey, which loaded Angolan oil in mid-April, arrived around May 19 off Shandong, the home to most of China’s independent refiners. It could only discharge about half of its 1.9-million barrel cargo at Rizhao on June 2 because of limited storage space before heading back to its
anchorage, according to refinery officials with direct knowledge of the matter. The rest of the crude will be offloaded at a different terminal later this month, they said. Stockpiles at seven ports in Shandong province were at almost 48 million barrels as of June 12, the highest level in four months. Inventories fell about 10% through the week ended on June 19.
Processing rates by Shandong’s independent refiners, known as teapots, surged to a record earlier this month, rising strongly after hitting a low in February due to virus-driven
lockdowns. China’s crude inventories are expected to gain by 440 million barrels during the first half of this year, according IHS Markit.