SINGAPORE, July 17 (Reuters) - Chinese oil refineries, led by heavyweight Sinopec (600028.SS), are set to boost Brazilian crude imports in the third quarter to replace some of the Saudi Arabian supply it cut after the kingdom hiked prices, industry sources said.
China, the world's top crude importer, has booked nearly 1 million barrels per day of Brazilian crude for August and September delivery, several traders said, of which 20 million barrels were purchased by Unipec, an arm of Sinopec, the top Asian refiner.
The volumes are significantly higher than the average in the first five months of the year, when China imported 3.02 million metric tons of Brazilian crude, or 729,125 barrels per day, Chinese customs data showed.
Sinopec did not immediately respond to a request for comment.
The increase in Brazilian crude purchases comes as Chinese refiners cut volumes from Saudi Arabia, its second-biggest oil supplier, which has hiked most of its crude prices for July and August after the OPEC kingpin volunteered to cut more output.
Saudi's move has tightened sour crude supply globally and strengthened the Middle East Dubai benchmark against Brent, the marker for sweet oil produced in the Atlantic Basin.
The narrow Brent-Dubai price gap , along with lower freight rates and rising production in Brazil, have enabled more oil from the South American producer to be shipped to China, traders said.
"Medium sour Dubai crude has recently priced at unprecedented premia to light sweet benchmark Brent," Goldman Sachs analysts said in a note.
"Prices have now become so dislocated, however, that physical tightness has re-emerged in the light sweet complex, aided by expensive Saudi OSPs (official selling prices) and observable declines to Russian flows."
Spot premiums for Brazilian grades such as Tupi have firmed on Chinese demand.
Tupi, a medium sweet crude, is traded at about $3.50 a barrel over dated Brent on a delivered basis to China for September-arrival cargoes, about 50-70 cents higher than the August price, the trading sources said.
China slashed crude imports from Brazil in 2022 when the Ukraine crisis broke out as it gobbled up cheap Russian oil. China's imports from Brazil plunged 17.7% to 498,571 bpd in 2022 from 2021, customs data showed.
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July 17, 2023 at 03:08PM
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China to boost Brazil oil imports in Q3, replacing some Saudi supply - sources - Reuters
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