Chinese oil buyers have turned to purchasing crude oil from West Africa and Brazil following a decrease in shipping rates over the past two weeks. In this regard, some Chinese refiners have bought crude oil of various qualities at prices up to $20 above the ICE Brent price for delivery in December.
Decrease in Shipping Rates and Increased Oil Purchases
Shipping rates for crude oil from the Atlantic basin to Asia reached their highest levels in early October. During this period, the cost of shipping crude oil from the U.S. Gulf Coast to China had risen to $80 million, which is ten times the average tanker rates in the years prior to the Iran war. These rates were so high that Asian refiners struggled to order U.S. crude oil for delivery in November.
Read more: Qatar Energy Extends Force Majeure for LNG Deliveries Until the End of 2026
However, shipping rates have decreased since early October but still reached around $60 million for a supertanker transporting oil from the U.S. to Asia last week. In the first week of October, the cost of shipping crude oil from the U.S. Gulf Coast to South Korea exceeded $42 per barrel, while the shipping rate from Brazil to China reached $39 and from West Africa to China exceeded $32 per barrel.
Competition for Oil Supply and Changes in Supply
The decrease in rates by about $10 per barrel for these routes has led Chinese refiners to purchase crude oil from Equatorial Guinea (Ceiba), Angolan crude oil (Saturno), and Brazilian crude oil (Mero). Meanwhile, increased competition for Russian oil supply, especially with India, has pushed ESPO grade prices from Russia's Far East upward.
Additionally, independent Chinese refiners, known as "teapot refiners," are seeking access to more economical oil resources, as the blockage of cheap Iranian crude from the market due to U.S. sanctions has posed challenges for their feedstock supply.
Read more: Iran's Energy Relations with Gas Exporting Countries Forum Members in Moscow · China Increases Domestic Oil Production Following Decrease in Iranian Supply
