Sunday, September 25, 2016

Oil Producers Tap Brewing Demand From China’s ‘Teapots’




Independent refineries in China, known as Teapots, have appeared as one of the most important force in the oil market today. OPEC is counting on these teapots production of crude oil to reform the global oil markets. These teapots are helping account for China to be characterized as one of the world’s large importers of crude oil. Teapots also play a dominant role in Chinese society, now the streets of Shandong are lined with gas-station owned by the Teapots. Crude oil imports have increased significantly in the Shandong province, approximately 60%, leading to long wait time for tankers to enter the ports.  OPEC member believe that it is crucial that they gain the Chinese teapot business and gain market share. Within OPEC they are competing to gain market share with the Chinese Teapots. The increase demand for using the privately owned Teapot refinery was due to a policy change in the Chinese government allowing the teapots to import foreign crude for the first time. This is creating opportunities for other suppliers and trades, but now OPEC has a bigger challenge ahead of them. The privately owned refineries have been import Russian crude oil and it has increased significantly over the last year, making Russia the largest crude oil supplier to China. The increase in Russian oil is they are more flexible in pricing and Saudi Arabia and Iran are more expensive and less flexible when making deals. This is an interesting article because you have to think with the oil industry being in a down turn, is this simply for price manipulation or is Russia become a bigger player by changing the financial terms. By Russia giving longer financial term to payback, they are allowing for the crude oil to be refined into gasoline or diesel and China will turn around and sell it in the whole sale market. Therefore the Teapots would need little capital to get a return on investment and be able to pay the Russians for the crude oil.

 

1 comment:

  1. Very interesting how they are called teapots! I did not know that China was playing such a large part in this business, and that they were importing Russian crude oil. Oil is really taking over the news outlets right now, and I think it's a huge mess because every country is looking out for their own best interests, and I'm not sure if a decision will ever be made that is beneficial for all.

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