Shipments of West African oil to Asia are set to hit a two-month high
in October as Chinese refineries scramble for alternatives to Iranian crude
before US sanctions take effect on November 4.
Loadings for Asia will rise to
2.52 million barrels per day (bpd) in October, equivalent to 75 per cent of
total output from Angola, Nigeria, Republic of Congo, Ghana and Equatorial
Guinea, based on Reuters calculations, shipping brokers and Refinitiv Eikon
This compares to September's 2.27 million bpd, which was almost 70 per
cent of regional output.
China has been the main driver
for Asian demand before the implementation of US sanctions that analysts
estimate will remove 500,000 bpd to 2 million bpd of Iranian oil from the
Chinese imports from West Africa are set to rise to a record 1.94
million bpd, or 60 cargoes, in October from 1.5 million bpd, or 45 cargoes, in
September. West African grades tend to produce a large proportion of high-value
distillates, such as diesel or jet fuel, much like Iranian crude oil, making it
an attractive replacement.
Other buyers across Asia and Europe have also said they would cut back
on purchases of Iranian oil, unleashing a burst of demand for West African and
other crudes rich in distillates, such as grades from Saudi Arabia or the North
The looming deadline on Iranian
crude is not the only factor behind the surge in demand for October cargoes to
Independent Chinese refineries,
known as teapots, eased up on imports earlier in the third quarter for
maintenance. Now they are restocking before the end of the month, as their
import quotas are based on purchases made from January to October.
"The resurgence of Chinese
teapot buying could not have come at a more awkward time for the oil
market," consultancy Energy Aspects wrote.
"China was widely expected
to need to restock. But its renewed appetite for crude has been bolstered by
panic buying from teapots," the consultancy said.
Elsewhere in Asia, India is offering some respite for the stretched
West African market, buying about 451,000 bpd in October, down from September's
500,000 bpd, while Glencore will ship a rare suezmax cargo of West African
crude to South Korea.
India's state-run refiners tend to take less West African crude at
tender and buy more on the spot market.
State firms Indian Oil Corp
(IOC), Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL)
will take 10 of the 14 India-bound cargoes.
Nigerian Agbami, Qua Iboe and Bonny Light make up the bulk of the WAF
exports to India.