Trafigura extends credit to China teapots to boost crude sales
(Reuters) Trafigura has extended the credit period for two independent Chinese refiners to buy crude, marking a more aggressive push by the global commodity trader to feed the growing appetite of so-called "teapot" refiners to import oil, sources said.
Trafigura has sold at least 3 MMbbl of Latin American crude, worth around $125 M at current benchmark prices, to teapots Shouguang Luqing Petrochemical Co. Ltd. and Huifeng Petrochemical Group, according to three trading sources with knowledge of the transactions.
Delivered in May and June, Trafigura allowed the buyers topay for the cargoes 90 days after loading, said these sources. Normally suppliers offer a tighter 30 to 60 days to make payment.
Teapots, which have boosted their imports after Beijing granted them import permits, are hungry to secure financing, but the rush to purchase by the relatively inexperienced buyers has increased trading risks with cases when deals have soured.
One trader with knowledge of the recent Trafigura deals said that these type of deals should suit the Swiss trading house given its extensive operations but other suppliers might not be prepared to conduct similar trades.
"We will look very closely at how these deals unfold," another source, a senior oil banker, said.
Under a "third-party processing" agreement, the Chinese counterparts committed to supply Trafigura with refined fuel, mostly gasoline, allowing the transactions to enjoy tax exemptions for the crude inflows and refined fuel exports, according to Chinese customs rules.
Under one of the deals, Trafigura sold 1 MMbbl of Venezuelan Merey crude to Shouguang Luqing, a 60 Mbpd refinery in eastern Shandong province, and received a commitment for 50,000 tons of gasoline, according to a Luqing procurement manager.
Trafigura also sold to Huifeng Petrochemical, a 116 Mbpd teapot refiner, 1 MMbbl of Colombian Vasconia crude and 1 MMbbl of Argentinian Escalante, under the same terms, according a Huifeng official.
Trafigura has emerged as one of the world's leading oil trading companies. It was the first to sell Iranian oil to teapots, selling part of a 2 MMbbl cargo on the Olympic Target tanker to at least two refiners.
The first teapot crude import licences were only granted last year and they have become a key driver behind the 14% rise in China's oil imports and its bulging fuel surplus.
Chinaoil, trading arm of China's state-run PetroChina, in July clinched a similar deal with Huifeng to supply 200 Mbbl of crude on credit and offtaking 10,000 tons of gasoline, said a trader with direct knowledge of the matter.
Reporting by Chen Aizhu and Meng Meng; Additional reporting by Florence Tan; Editing by Henning Gloystein and Christian Schmollinger
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