BEIJING: China's Sinopec Corp is seeking to buy crude oil at a lower price starting from April, trade sources said, as Asia's biggest refiner aims for savings after spending nearly $150 billion on crude shipments last year.
The move comes amid a push by Beijing to make bloated state behemoths more efficient and as Sinopec attempts to restructure to add value for investors. Two weeks ago Sinopec announced it will partially privatize its marketing arm.
Sinopec has asked its trading arm China International United Petroleum and Chemical Co. Ltd., or Unipec, to target a purchase price of $1 per barrel discount to the weighted average of benchmark crude Brent, Dubai and WTI on free-on-board basis, said three traders with direct knowledge of the matter.
Sinopec has previously tried to rein in crude costs but the latest plan is seen as more aggressive, with one company trader putting the cost-saving target at nearly $1.5 billion a year.
The move is unlikely to impact China's oil import volumes or weigh significantly on global oil prices that have drawn support for a good part of the past decade from the country's ballooning consumption.
But it may make Unipec, one of the world's biggest crude buying companies, tap the swaps and futures market actively to hedge costs and drive it to buy more cost-competitive crudes such as Iraqi Basra Light.
The new plan was mooted by Sinopec's refining department, which has over the past few years pressed Unipec to curb costs. But this time the plan has won the backing of Sinopec Chairman Fu Chengyu, two company traders said.
"The message from Sinopec's management is clear: to squeeze more profits from the markets, setting a higher standard for the Unipec traders," said a crude trader who is a former Sinopec procurement official.
State-owned Sinopec currently does not have a target price for its crude buying. It was not immediately clear how the new target price compares with last year's actual buying cost.
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