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Economy
China turns to cheap Canadian crude oil for a bargain
CKN
2018/10/12 04:36:54
2,250

Oct 12, 2018 (China Knowledge) - Chinese oil buyers are looking to strike a bargain on Canadian crude as they look to take advantage of both demand and supply factors. Canadian crude is currently priced 60% lower compared to the benchmark West Texas Intermediate (WTI) and global marker Brent.

Apart from being a fuel source, Canadian crude is also bitumen-rich and Chinese demand for bitumen has been rising in recent years. As the country continues to invest on infrastructure, demand for bitumen which is widely used in construction has increased. China’s infrastructure spending in the second half of this year has accelerated 5 times higher than that in the earlier half of the year, bringing bitumen prices to record levels.

At the same time, Canadian crude prices have dropped after rising production running into pipeline bottlenecks and maintenance works cutting refinery capacity at regular buyers in the U.S. Midwest. Canadian crude looks to be a bargain now amid a backdrop of rising oil prices globally due to expected U.S. sanctions on Iranian exports and economic crisis hitting Venezuelan shipments.

China bought 1.58 million barrels of Canadian crude in September, 50% higher than the 1.05 million barrels the country bought in April. Demand is expected to increase, being supported by independent refiners in the country who seek to explore new strategies to stay profitable due to increased competition from mega refiners and regulatory crackdowns. Bitumen refining has been identified as one field these independent refiners retain an advantage in.  

The Canadian Crude Index currently stands at 29.24, falling about 25% from 39.07 since the start of October.

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