Cargoes Pile Up As Chinese Demand for Latin American Oil Grinds to a Halt
Sales of Latin American oil cargoes to China have ground to a halt this week as the deepening crisis around the coronavirus further stifles an already quiet holiday period.
Zero sales have been reported since last week for March cargoes from Brazil and Colombia and unsold cargoes are piling up, according to people familiar with the matter. Interest from buyers has been sluggish. China hasn’t so far canceled or postponed any cargoes set to load in February, the people said.
It’s the latest ripple effect from the coronavirus, which has so far left 170 dead and infected at least 8,000 people in China, threatening to hit economic growth in the world’s biggest oil importer. Crude futures are heading for their worst month since May, prompting OPEC and its allies to consider holding an emergency meeting in February.
Refineries in China — which take 30% of shipments from Brazil, Colombia and other major Latin exporters — are expected to cut production amid speculation that travel restrictions put in place to halt the spread of the coronavirus will dampen demand for gasoline, diesel and jet fuel. China’s importance to the oil market has grown sharply in recent years, with its share of global oil consumption doubling since 2003.
Brazil has become the main Latin American oil supplier to China, surpassing Venezuela, which is plagued by sanctions and an economic and humanitarian crisis. Brazilian oil Lula is, after Russian ESPO, the most sought-after grade by China’s independent refineries, known as teapots. The teapots are the most exposed to a drop in domestic consumption and are likely to be hit the hardest by the impact of the coronavirus, according to oil traders in Asia.
China has long feasted on heavy, high-sulfur Latin American oil as a cheap feedstock for its expanding refinery capacity. The top 3 most imported grades from Latin America are Lula, Venezuelan Merey and Colombian Castilla, data compiled by Bloomberg shows.Source: www.worldoil.com