Oil Market Dynamics Benefit Chinese Refiners

Tuesday July 2, 2019

Distillate demand from shipping has prompted Chinese refiners to use light-cycle oil which they can blend with diesel fuel to increase volumes of IMO2020 compliant fuel.

Blending light cycle oil is cheaper than extracting distillates from crude oil while imports of the product into China rose in April and May, according to business news provider Bloomberg.

"Anecdotal evidence shows that diesel demand is supported from agriculture and unreported bunkering use in China," Energy Aspects analyst Michal Meidan was quoted as saying.

An increase in blended fuel oil in the bunker market has been highlighted by market observers as an inevitable effect of the global 0.5% sulfur cap on bunker fuel. The spate of 'new' fuels could cause problems for some ships, observers have said.