UPDATE 1-Chinese refiner ZPC cuts runs by 20% as Iran war tightens crude supply
SAUDI ARAMCO 2222.SA | 27.60 | +0.15% |
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By Trixie Yap, Chen Aizhu and Siyi Liu
SINGAPORE, March 3 (Reuters) - Zhejiang Petrochemical Corp, a major Chinese refiner backed by Saudi Aramco, is shutting a 200,000-barrel-per-day crude unit as it brings forward maintenance at a time when the Middle East conflict is tightening crude oil supply, it said on Tuesday.
The month-long overhaul in March will cut throughput by 20%, a company representative told Reuters. Designed to process 800,000 barrels per day, the refinery is one of China's largest, running above its nameplate capacity in February, sources said.
The U.S.-Israeli war with Iran has cut off nearly all shipping in the Strait of Hormuz, a conduit for 20% of global oil supplies.
The world's biggest oil importer, China sources roughly half its crude from the Middle East, and the lengthening supply squeeze pushing up oil prices is expected to spur other refiners to trim runs, industry sources said.
"We had earlier planned the overhaul around March and April, and now we're bringing this forward under the current circumstances," the ZPC official said.
Privately-controlled ZPC has a 20-year supply agreement with state-run Saudi Aramco 2222.SE for 480,000 bpd of crude and operates four 200,000-bpd crude units in Zhoushan in eastern China.
Aramco owns a 10% stake in Rongsheng Petrochemical 002493.SZ, ZPC's largest stakeholder.
Apart from Saudi oil, which supplies 60% of its designed capacity, ZPC is one of China's top buyers of Canadian oil.
It also buys from the UAE, Kuwait and Iraq, with the Middle East accounting for 75% to 80% of its total purchases, tanker tracker Vortexa estimates.
Unlike many Chinese independent refiners, ZPC has shied away from Western-sanctioned supplies from Russia, Iran and Venezuela, industry and trade sources have said.
Some Chinese refineries heavily reliant on Middle East term supplies may trim crude runs by as much as 20%, Energy Aspects analyst Sun Jianan wrote in a note on Monday.
"Chinese refineries are likely to undertake precautionary run cuts as Middle East shipping flows come to a standstill," Sun wrote.
However, Chinese independent refiners for the most part have enough supply on hand to weather near-term disruption from the Iran conflict, bolstered by recent record purchases of Iranian and Russian crude and robust government stockpiling, traders told Reuters.
