At the middle of this year, Ministry of Commerce released the 2nd batch of imported quota of crude oil when some teapots had used up the 1st batch of imported quotas.

    According to JLC, there were 32 teapots acquired a total imported quotas of 22.92 million mt, only accounting for 33% of the first batch, and the total amount of this two batches were 91.73 million mt, which was far more than 87.6 million mt released at the end of 2016 for the allowed amount in 2017. It also verified the principles of superaddition and adjustment shown in the documents released at the end of 2016. In addition, in this batch 19 teapots (excluding ChemChina) were granted to use imported crude oil 15.77 million mt, accounting for 68.8% of the total quotas with an absolute position.

    At present, as known as JLC, Hongrun Petrochemical and Qirun Petrochemical’s allowed quotas were only in single digits, and the allowed amounts of Kenli Petrochemical, Lijin Petrochemical, Baota Petrochemical and Shouguang Luqing were also below 200,000 mt. Of course, in this year during the two batches the teapots holding well performances on importing crude oil still acquired above 90% of the usage quotas of imported crude oil. Baota Petrochemical, Chambroad Petrochemical and Haiyou Petrochemical’s allowed quotas of the two batches were less than 50% of the usage quotas, because their quotas consumption performed poor.

    In May, the central government released the Several Opinions on Deepen the Petroleum and Natural Gas Structural Reform to perfect the management system of importing and exporting oil and gas and promote the international and domestic resources utilization ability and market risk preventing ability. The reform task of the document has already begun pilot implementation. Since May 5th the Development and Reform Commission stopped accepting the declaration materials of crude oil processing enterprises to use imported crude oil, and in the future it will further regulate the use of imported crude oil. Crude oil quota release procedures will become increasingly strict, and the released amount will also be more in line with the domestic market actual demand ability to prevent the waste of resources.

    According to JLC, there were 10 teapots successfully submitting the materials before May 5th, so in 2017 the NDRC’s approval and release of the usage quotas of imported crude oil would continue in the whole year. The total estimated amount by JLC of 40 teapots’ usage quotas of imported crude oil would be around or above 120 million mt, so the teapots’ crude oil supply would be still sufficient.

    In addition, according to the Ministry of Commerce In 2017 Total Allowed Amount of Importing Crude Oil for Non-stated Trade, Applying Conditions and Procedures issued in December 2016 showed that the total allowed amount in 2017 was 87.6 million mt, but the two important principles were release in batches and additional adjustments. So according to the above we mentioned 10 teapots successfully submitted the applications for imported crude oil usage quotas, the allowed amount to be issued following it is also reasonable. So even if the second batch of allowed amount was issued, in the future whether there is additional adjustment still has some space.

    At present, according to JLC, there were a number of teapots that has used up the first batch of crude oil quotas, so the file was a reassurance to the crude oil market. The time point was also ahead of the previously expected late June or early July. Of course, there were few teapots allowing to use import quotas less than expected.

    In addition, in the future the crude oil quota release will also take the domestic market supply and demand pattern into consideration, due to the current domestic resources oversupply contradiction becoming more prominent, and the domestic resource supply growth point has fallen on the independent refineries. In the first half of 2017, as the domestic main refineries’ run rate started to decline, in January-April the total processing volume of PetroChina and Sinopec fell 0.79% YoY, but the teapots production increased by 3% YoY, indicating the teapots influence is growing. According to JLC, 2017 in January-April, the domestic market production and demand gap was further widened and reached 11.0163 million mt, an increase of 26% YoY, and the domestic resources supply pressure was further enlarged. In order to ease the domestic high inventory pressure, the control of the upstream raw materials will also be further standardized.

    At present, in early June, domestic crude oil futures could be operated and took a great step towards the normal listing, which also indicated that the opening up of the energy market is further accelerating, and it still needs some standardized measures to ensure the healthy operation of the market.  In the future, the teapots’ development will become increasingly standardized.