LONDON: Asian loadings of West African crude are set to fall by 11 percent in November on a barrel per day (bpd) basis versus October, due to expensive Brent prices, high freight rates and some Chinese independent refiners hitting their import quotas, industry sources said.
China's loadings of West African crude are set to fall for a second month, by four percent in November at 1.235 million bpd versus October at 1.287 million bpd, despite the shorter month.
Trading sources at several Chinese refiners said the decline was in part due to independent refiners having either reached or nearly reached their crude import limit for the year.
China's Ministry of Commerce increased the overall crude import quota for 2017 but cut the volume allocated to independent refiners, known as "teapot refiners", by 17 percent.
"The teapots get a certain allocation to buy imported crude, which they have almost exhausted," Energy Aspects analyst Michal Meidan said, adding that Chinese refiners had overbought in the first half of the year.
"They start buying again when they get an indication from the government as to when the licences are renewed and rough volumes but thus far there is no news on next year's allocation so the teapots have gone quiet."
Other factors that have continued to weigh are the wide spread between Brent and Dubai crude swaps <DUB-EFS-1M> and the backwardated structure in oil futures since September.
Backwardation is a market condition in which it is more attractive to sell oil immediately than store it, the crude also loses value as it heads to Asia.
The Brent-Dubai spread has been fluctuating around $2.50 a barrel since mid-October, close to the end-September 10-month high of $2.59 a barrel.
The wide spread has made crude priced off Brent more expensive to Asian buyers, who have been increasingly looking at cheaper US oil, traders said.
US crude oil exports hit a fresh record high last week at 2.1 million barrels per day, according to the US Energy Information Administration.
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