Sinopec to prioritise China’s fuel supply as pressures mount

China’s biggest oil refiner cut operating rates by 5 per cent in March to conserve oil. Read more at straitstimes.com.

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HONG KONG - China’s biggest oil refiner said it will prioritise ensuring domestic fuel supplies as it braces for a prolonged conflict in the Middle East.

State-owned China Petroleum & Chemical Corp, more commonly known as Sinopec, cut operating rates by 5 per cent in March to conserve oil, as the difficulty of shipping crude through the Strait of Hormuz chokes supply, vice chairman Zhao Dong told an earnings briefing in Hong Kong on March 23.

Current oil stockpiles are enough to cushion China from the spike in international prices over the next two months, Mr Zhao said. The company will adjust run rates in April and May depending on how the market develops, but over the long-term its planning will need to take into account a higher cost of crude, he said.

Although China’s state-owned refiners have begun exploring purchases of Iranian oil to widen their supply options, Sinopec isn’t enthusiastic about the move. The company will try and avoid Iranian shipments due to limited cargo availability, and because the Trump administration’s one-month waiver allowing for purchases leaves too narrow a window for delivery, Mr Zhao said.

Sinopec is seeking crude for April and May from Saudi Arabia, via the Red Sea port of Yanbu that isn’t affected by the Hormuz blockage, Mr Zhao said. It’s also open to taking US supplies, depending on how trade talks between the two countries go. The presidential summit planned for the end of March in Beijing was put on ice by the US because of the war.