SINGAPORE/BEIJING: A 20 percent drop in global oil prices has whetted top energy consumer China's appetite for crude with PetroChina snapping up more than 8 million barrels in just over a week.
Ample crude oil supply and lower economic growth from China to Europe has hammered oil prices over the past three months, with Brent this week hitting its lowest in more than two years.
But prices may have reached a point where consumers such as China - the second largest oil importer after the United States - finds it attractive to buy more crude.
Chinaoil, a unit of state-owned PetroChina, bought the equivalent of 17 cargoes of 500,000 barrels each of Middle Eastern sour crude over just six trading days this month.
"Amidst China's slowing economy, the only reason for the strong oil buying yesterday is just Chinaoil acquiring more strategic stockpiles for the state at distressed prices," said Gordon Kwan, head of regional energy research at Nomura.
"This is also to hedge against a potential seasonal oil price rebound this winter, and ahead of potential production cuts announcements during the next OPEC meeting."
The buying spree could also have resulted from stronger demand for sour crude after PetroChina's refinery in the southwestern Guangxi region finished revamp, traders said.
PetroChina Guangxi Petrochemcial, which operates a 200,000-bpd refinery in the coastal city of Qinzhou, completed a retooling programme around August, enabling it to process high-sulphur crude.
China's crude oil imports have risen 8.4 percent in the first eight months this year from the same period in 2013 as new refineries and oil storage tanks for strategic reserves came online. China's crude import growth so far this year exceeds the 4 percent rise seen in 2013.
Chinaoil's large volume of purchases on the Platts trading window created a buzz in the market and has strengthened crude benchmark Dubai, raising Asian refiners' concerns that their oil costs could rise and margins weaken.
"They are making life more difficult for refiners," a trader with a North Asian refiner said. "Saudi OSPs (official selling prices) will get stronger and refining costs will rise."
The Dubai contango between the first and the third month narrowed by $1 from last month to about 20 cents, he said, likely to prompt Saudi Aramco to raise December OSPs next month.
Oil products margins were depressed on Wednesday due to the higher Dubai prices and ample supply.
Naphtha crack slipped to its lowest in nearly a year, and gasoil was at a more than 2-month low.
Brent crude dropped as low as $90.57 a barrel on Wednesday, its lowest point since June 2012. It has since recovered to around $91.50 as the U.S. dollar weakened.
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