China decided to create the world's largest oil buyer

Monday, 29 June, 2020 - 12:22

Several Chinese oil refineries, including China Petroleum & Chemical Corp.  (Sinopec), Sinochem, PetroChina and China National Offshore Oil Corporation (CNOOC) are in talks to form a group for joint oil purchases abroad, Bloomberg reports citing its sources.  According to the agency, the formation of such a union has already received approval from the Chinese authorities and relevant regulatory bodies.

 Representatives of companies that import a total of 5 million barrels each take part in the negotiations.  oil per day.  Bloomberg notes that the merger of these companies on the issue of procurement policy would lead to the creation of the world's largest oil buyer.  This would enable the companies involved in the transaction to avoid price wars among themselves and influence the price offered by suppliers.
 At the initial stage, the alliance members plan to jointly submit applications for the purchase of certain varieties of Russian and African oil on the spot market, Bloomberg sources said.  The agency’s interlocutors also noted that the first such application for the purchase of Siberian oil ESPO, delivered through the East Siberia-Pacific Ocean (ESPO) pipeline, can be submitted in July.  In the future, independent oil refiners may also join the alliance, including the so-called teapots (small refineries) from Shandong province.
 Bloomberg believes that the reason for the attempt by the Chinese oil refiners to form a purchasing alliance is the increase in prices for raw materials in the spot market after the Chinese economy began to recover from the coronavirus epidemic COVID-19.  The agency recalls that back in 2003, Chinese steel companies formed an alliance to purchase copper concentrate abroad.  Now, the group known as CSPT includes more than a dozen companies purchasing through it about 80% of all imports of copper concentrate in China.