Chinese refiners are increasingly purchasing crude oil from West Africa and Brazil, driven by a significant drop in long-haul freight rates that has made these distant sources more cost-effective. Independent refiners, known as teapots, are securing barrels at a premium of $15 to $20 per barrel above ICE Brent for December delivery to China. This shift occurs as competition for Russian ESPO crude intensifies, with prices for that grade rising due to high demand from India and China’s state-owned majors following disruptions from the US-Iran conflict.
Freight costs have declined notably; shipping rates from West Africa to China fell from nearly $33 to $24.50 per barrel, while rates from Texas to South Korea dropped from $42.60 to $31. Specific grades acquired include Ceiba from Equatorial Guinea, Saturno from Angola, and Brazil’s Mero. Iraqi Basrah is also being offered at a $15 premium.
These alternatives provide vital relief for teapots operating on thin margins, especially after the US naval blockade of Iranian ports cut off access to cheap discounted crude.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing