Reuters: China’s top refiner Sinopec Corp will in January buy less than half the crude it typically imports from Iran, trade sources said on Monday, as the two haggle over terms against a backdrop of rising international pressure on Tehran.
By Chen Aizhu
BEIJING, Dec 19 (Reuters) – China’s top refiner Sinopec Corp will in January buy less than half the crude it typically imports from Iran, trade sources said on Monday, as the two haggle over terms against a backdrop of rising international pressure on Tehran.
Iran’s largest crude buyer has cut its January purchases by about 285,000 barrels per day (bpd), sources said. That is over half of the close to 550,000 bpd that China has been buying on annual contract this year.
With a U.S. presidential election less than a year away, anti-Iran rhetoric has increased in Washington, where Congress last week passed legislation aimed at blocking payments by Iran’s oil buyers.
EU leaders also called on Friday for more sanctions against Iran by the end of January, to tighten restrictions put in place over the country’s disputed nuclear programme.
Chinese state trader Zhuhai Zhenrong Corp has cut 120,000 barrels per day from its Iranian crude imports for January, a senior Chinese oil trader familiar with the talks between the Chinese buyers and the National Iranian Oil Company (NIOC) said.
“The volume for Zhenrong will be halved for January,” the source said on condition of anonymity due to the sensitivity of the issue.
Sinopec instructed Zhenrong to make the cut, the source said. Zhenrong has a deal to buy from Iran and deliver the crude to Sinopec refineries in China.
Sinopec last week also cut the volumes it imports under a second, direct deal with NIOC. It has reduced imports for January by around 165,000 bpd, industry sources told Reuters last week.
The two sides disagree over the period given to Sinopec to pay for the oil, sources said. Sinopec requested a 90 day credit period, while Iran wants the refiner to pay in 60 days. For 2011 term contracts payment terms were on a mix of 60 and 90 days, depending on which refinery was taking the crude.
A Beijing-based Iranian oil official said he could not immediately confirm the cut from Zhenrong, but said the companies disagreed over credit terms.
“The main problem is about payment,” said the Iranian oil official. “About prices, there were no big gaps.”
Though the cuts of 285,000 bpd make up less than 6 percent of China’s total daily crude imports of 5 million bpd, Sinopec will need to fill the gap from alternative sources.
One could be Libya, from which Sinopec bought a total of 2 million barrels for December or January lifting, after a halt for more than half a year due to the civil war there, traders said.
Huang Wensheng, spokesman for both the parent company and the listed arm Sinopec Corp, said he was not aware of the cuts so could not comment.
“Our trading department is in full charge of procuring crude oil for Sinopec. We rarely make checks on them about this type of information,” he said.
Sinopec, which has over recent years been boosting its trading portfolio, boasts nearly 1 million bpd of crude from its global trading network, a pool it can easily tap but which would mean other buyers would suffer.
Its refineries are already sniffing around for substitutes.
“It seems that refineries now are ready to take some light crudes which they normally wouldn’t buy because of higher prices,” said a second Chinese trader.
He said some Sinopec plants are looking for oil to replace Iranian South Pars condensate that was among the crudes cut from the January programme. (Additional reporting by Judy Hua and Jim Bai; Editing by Michael Urquhart)