Sinopec says to Continue Iran Oil Imports

Chinese oil refiners may not be able to import US crude at all if the government goes ahead and levies a 25% tariff on American energy products and this will directly impact demand for VLCC tonnage, a senior Sinopec executive said on Tuesday.

"However, the upcoming US sanctions have not had any impact on China's crude purchases from Iran, which are moving in line with demand," the executive was quoted as saying by Platts.

"It is a policy decision to be taken by the government but if the proposed tariff is implemented, Chinese crude imports from the US will not be viable and we may have to stop."

For crude purchases from Iran, oil refiners in China are using ships that do not have any exposure to the US, and therefore the business is not affected despite the US decision to reimpose anti-Iran sanctions after quitting the nuclear deal it had signed with world powers.

China's demand for crude is on the rise because of new refining capacity that is being added in the country and this is favorable for VLCCs' freight rates though part of it will be offset by increased supply of ships, shipping industry executives said.

Hengli Petchem and Zhejiang Rongsheng's new 400,000 bpd refinery each in Dalian and Zhoushan, respectively, are expected to come on stream in the last quarter of this year. In the same quarter, CNPC's 100,000 bpd and Sinopec's 200,000 bpd incremental capacity in Huabei and Zhanjiang, respectively, are also expected to become operational, they said.

On the OPEC and non-OPEC countries' decision to step up crude output, the Sinopec executive said the actual increase in production is unlikely to be more than 700,000 bpd, which is below China's expectations and will keep crude prices firm.