China oil traders become stronger force

China's two largest state-backed oil traders are demonstrating their growing clout in the Middle East, dominating dealing this month in the key crude contracts that help set prices for the region.

Chinaoil, the trading arm of state-run China National Petroleum Corp, has bought 45 cargoes of Oman and Abu Dhabi crude in April, snapping up 22.5m barrels or the equivalent of a quarter of the world's daily crude oil demand.

The scale and scope of the Middle East oil purchases are notable as they took place in public trading windows that help determine the region's benchmark prices, unlike the majority of China's oil deals.

Unipec, the trading arm of Sinopec - CNPC's biggest rival - sold 31 of the Oman and Abu Dhabi crude cargoes that Chinaoil bought. Unipec also bought one cargo of its own, according to data from Platts, a commodities price-reporting company that operates the trading windows.

Purchases by Chinaoil and Unipec are close to matching the record 47 cargoes bought in October by Chinese companies and could surpass this level in the last two trading days of the month.

"Chinese firms are increasingly the price makers in the regional crude oil markets," said Owain Johnson, chief of products and services at the Dubai Mercantile Exchange.

"This month shows just how much firepower they have at their disposal," he added.

The buying spree has underpinned the price of benchmark Middle East crude and helped boost the international marker Brent to $65 a barrel.

China has traditionally relied on independent trading houses to help procure oil to meet its fast-growing energy needs. But in recent years China's state-backed companies have expanded their own trading operations to exert greater control over their imports.

Chinaoil and Unipec have established trading desks in big trading hubs such as London, Geneva and Singapore to give them greater insight into crude oil prices and to boost profitability. Neither company could be immediately reached for comment at their London offices.

"This is a very clear demonstration of the market strength of the Chinese oil majors and their growing role in determining Middle East oil prices," Mr Johnson said.

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During the first quarter of this year, China's total apparent oil demand grew at the fastest pace in three years to reach 10.5m b/d even as its economic growth rate has eased. It accounts for one in every nine barrels consumed globally.

"Asian demand for oil remains strong," Ali Al Naimi, Saudi Arabia's oil minister, said in a speech in Beijing on Tuesday.

Oil traders in Asia have also been buying additional crude cargoes in the Middle East spot market - those that are not part of long-term supply deals - due to loading delays from Iraq.

More than 30 tankers - the vast majority of which can carry more than 2m barrels of crude - are currently anchored off Iraq's southern port of Basrah waiting to load, trading sources said and ship-tracking data shows. Bad weather conditions earlier this year contributed to the queues.

Richard Mallinson, an analyst at consultancy Energy Aspects, said 32 of the first 36 tankers loaded this month were originally scheduled to load in March.

"While bad weather has not been disrupting loadings [in April], a significant backlog of tankers remains from previous months," he said.

Traders said the Iraqi delays had forced some Asian refiners to look even further afield, with Thailand, Taiwan and South Korea all booking cargoes of Forties crude oil from the North Sea in recent weeks.

That move has also supported the price of Brent, which is underpinned by supplies from the Brent, Forties, Oseberg and Ekofisk fields.

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