The recent news that the chemical fiber giant Rongsheng Group purchased a large amount of crude oil has also become a hot spot in the market. It is reported that it purchased 5 ships of nearly 10 million barrels of Middle East crude oil, including 4.5 million barrels of Shangzha, 1.5 million barrels of Qatar, 2 million barrels of Pakistan and 2 million barrels of Oman. This news can be said to have stirred up waves with one stone, injecting new vitality into China’s long-dormant non-state crude oil trading market.
So, what is the mystery behind Rongsheng Group’s large purchase of oil?
Buying on dips shows super purchasing power
Low prices, high probability of rising expectations , for oil traders, it is a good spot buying opportunity. According to reports, some oil traders used tankers to store oil in the first half of the year, preparing to make profits in the coming period. These include several major companies such as Trafigura, Vitol, Litasco and Glencore. Commodity traders. The maximum charter period has reached 3 months, and the storage capacity of very large crude oil carriers (VLCC) has increased again.
When there is a serious excess supply of crude oil in the world and oil prices are at an absolute low, it is easy to induce hoarding activities. During the low oil prices in the first half of the year, China, as a major oil consumer, has been experiencing good demand. As the second largest consumer of crude oil in the world, my country is more than 70% dependent on crude oil imports. Low oil prices can save our country’s refineries a lot of raw material procurement costs and foreign exchange reserves.
According to industry analysis, Chinese refineries generally purchase foreign crude oil two months in advance. Since March this year, international oil prices have fallen below US$40/barrel, and refineries have taken the opportunity to purchase large amounts of crude oil, which will arrive in ports from May to August. According to data from the General Administration of Customs, my country’s crude oil imports exceeded 45 million tons in a single month from May to August, a year-on-year increase of 7.74 million tons, 13.6 million tons, 10.25 million tons, and 5.313 million tons respectively.
Although the import volume surged, the import value fell sharply. From May to August, my country’s crude oil import volume did not exceed 15 billion U.S. dollars, and the import unit price was less than 320 U.S. dollars/ton. This is the benefit that low oil prices bring to the industry. According to the latest disclosed financial report, Rongsheng Petrochemical achieved operating income of 5.028 billion yuan in the first half of this year, a year-on-year increase of 27.32%, and net profit attributable to shareholders of listed companies was 3.208 billion yuan, a year-on-year increase of 206.55%.
Dating back to the second quarter of this year, under the opportunity of low oil prices, Shandong local refineries started the peak period of stockpiling. Strong demand directly led to an increase in crude oil discounts, so the buying prices of refineries that subsequently entered the market increased. Entering the fourth quarter, traditional land refining was affected by multiple factors, and the willingness to purchase was significantly reduced. From November to December, cargo transactions were scarce.
The sluggish domestic demand has also led to price cuts in the crude oil market. It is reported that Rongsheng purchased more tail goods from the Middle East. Although the details of the transaction are unknown, the price of DME has been at a low level recently. It can be said that It’s buying on dips. Of course, there is little interest in buying in traditional land refineries, but Rongsheng Group has shown strong purchasing power and has also gained popularity among the outside world.
The second phase of Zhejiang Petrochemical is about to start, and the fourth batch of quotas is likely to be approved
Secondly, in the latest announcement, Rongsheng Petrochemical said, “After the first phase of Zhejiang Petrochemical’s ’40 million tons/year refining and chemical integration project’ was put into operation, the production of each device has progressed smoothly, and profitability has gradually emerged. The second phase of the project has now entered the on-site implementation stage, and is planned to be completed in April 2020 Trial operation will begin in the quarter. “Rongsheng Petrochemical will have a third refinery. Once the third phase of the project is completed, the company’s annual petrochemical product output will reach 60 million tons. “The source said frankly. The second phase of Zhejiang Petrochemical’s refinery under Rongsheng is scheduled to be put into operation in the fourth quarter of this year, and market sources say that a 10 million tons/year atmospheric and vacuum unit will most likely be opened in October.
At the same time, market participants said that Rongsheng Group has applied to the National Development and Reform Commission for the fourth batch of crude oil import quotas this year, but no latest approval news has been released. Of course, if the second phase of the project starts as scheduled, market participants It is believed that the approval of the fourth batch of quotas is a high probability event, which seems to be confirmation of Rongsheng’s large-scale purchases. Prepare for next year’s crude oil import quotas
Third, it is reported that Rongsheng The cargo purchased by Sheng this time is basically Middle Eastern cargo loaded in November. It takes two to three weeks to arrive in Zhoushan, which has triggered speculation about crude oil import quotas for next year. Generally speaking, the Ministry of Commerce issues inventions before the end of December. The first batch of crude oil quotas for the year, and cargo arriving in mid-December and later can basically use the next year’s quota for customs declaration. Considering that the second-phase unit is about to be put into production, the amount of crude oil quotas issued by Zhejiang Petrochemical next year may be considerable, with a conservative estimate of 3,000 About 10,000 tons.
To sum up, in the fourth quarter, traditional refining quotas were insufficient and refining profits were sluggish, and construction starts continued to decline. At the same time, the Ministry of Finance The imposition of oil price control risk reserves has also had a negative impact on the overall refining situation, and the procurement of raw materials for refining has been very cautious and restrained. In this environment, Rongsheng Group’s operation is a sure profit, both in terms of reducing refining costs and increasing corporate visibility. Of course, from late October, local refineries will also start crude oil purchase plans for next year. It is expected that cargo demand will be high in the next one to two months.��It may recover slowly, and Rongsheng Group may still maintain strong buying interest.