Chinese oil refineries have begun negotiations on joint oil purchases. If they are successfully completed, the largest buyer of raw materials will appear in the world, who will be able to influence its value, Bloomberg reports.
The future group will include China Petroleum & Chemical Corp. (Sinopec), Sinochem, PetroChina, and China National Offshore Oil Corporation (CNOOC). Regulators have already approved the union, which collectively buys five million barrels of oil per day.
According to the publication, the creation of such a union will allow companies to avoid price wars. Initially, they want to file joint applications for some varieties of Russian and African oil in the spot market.
At the first stage, changes in purchases may affect the Siberian grade of ESPO oil, which is supplied via the East Siberia-Pacific Ocean pipeline. A joint application may be submitted as early as June.
The members of the alliance admit the possibility of its expansion so that independent oil refiners, including small ones, from Shandong province will then join them.
The idea itself arose against the backdrop of rising prices in the spot market, which happened simultaneously with the beginning of the Chinese economic recovery after the coronavirus epidemic. An analogue was the group for the purchase of copper concentrate, which Chinese metallurgists created in 2003. Currently, through it goes 80 percent of imports of this product to China.
Earlier experts drew attention that in 2020, taking advantage of low oil prices, China decided to increase the import of raw materials, although the demand for the products of local oil refineries will decrease due to the coronavirus pandemic.