China's Feb oil imports fall as tax rules curb buying by independents

By Meng Meng and Chen Aizhu

BEIJING (Reuters) - China's February crude oil imports fell sharply from January's record as independent refineries curbed buying amid worries about new tax rules, while natural gas imports held at high levels to heat homes during a bitter winter.

China's February crude oil imports of 32.26 million tonnes, or 8.41 million barrels per day, were 12 percent below January's record high of 9.57 million bpd, data from the General Administration of Customs showed on Thursday.

For the first two months of the year, China brought in 72.9 million tonnes of crude oil, or 9.02 million bpd, compared with an average of 8.4 million barrels bpd throughout 2017.

"Teapots are cutting back utilization because of fears over the new consumption tax policy, which is supposed to work towards hampering tax evasion," said Harry Liu of consultancy IHS Markit.

China issued new tax rules in January that aimed to address a long-held complaint by China's state-owned oil companies that privately owned refiners and blenders, known as teapots, have grabbed market share by undercutting their prices through tax avoidance.

The lower imports also came as refineries eased up on buying ahead of the Lunar New Year holiday in mid-February, when manufacturing plants shut for up to two weeks.

A government crackdown on pollution and a push for tougher emissions standard also affected production for many refineries in the industrialised province of Shandong, a manager with an independent refinery said before the data was released.

He declined to be identified as he was not authorised to speak with media.

China, meanwhile, maintained its high pace of natural gas imports. February's 6.94 million tonnes was steady on a daily basis with January's 7.7 million tonnes, which marked the second highest level on record on a monthly basis.

Imports of both piped gas and liquefied natural gas (LNG)have hovered around record highs in winter months as residents in northern regions switch to the fuel for heating as part of Beijing's drive to clean up the environment.

The massive government push to heat millions of homes and power thousands of factories with natural gas in northern China led to demand for the fuel outpacing supply, while delivery infrastructure struggled to manage the higher consumption.

Wang Wen, gas analyst with consultancy Wood Mackenzie, expects LNG imports to ease after the winter heating season ends in mid-March, but purchases could buck the usual seasonal trend.

"Let's wait and see if the government is going to push wider the gasification campaign, or if there will be pent-up industrial demand emerging," said Wang.

State-run energy giants such as PetroChina and CNOOC may also start stockpiling LNG in summer months to fill the storage tanks drawn down in peak winter season, she added.

(tonne =7.3 barrels for crude oil)

(Reporting by Meng Meng and Chen Aizhu; editing by Richard Pullin)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)