China's state-owned oil refining giants are in discussions to form a purchasing group to buy crude together, increasing their bargaining power, and avoiding bidding wars, Report says, citing Bloomberg.
Senior executives from China Petroleum & Chemical Corp., PetroChina Co., Cnooc Ltd., and Sinochem Group Co. are in advanced talks to iron out the plan's details. The proposal has won the support of the Chinese central government and relevant industry watchdogs, the people said.
For a start, the group is set to collectively issue bids for specific Russian and African grades in the spot market. While it's unclear how the cooperation will evolve, the group represents refiners that import over 5 million barrels of oil a day. That's nearly a fifth of OPEC's total output, which would make it the world's largest crude buyer in theory. The initiative first mooted in 2019 gained traction this year as the coronavirus spurred historic output cuts by OPEC and its allies to regain control of the market.
The original epicenter of the pandemic, China, was the first major economy to reopen, and its consumption of transportation and industrial fuels is now almost back to pre-virus levels. In recent months, the v-shaped recovery prompted the country's state-owned and independent refiners to snap up Russian and Brazilian crude in the spot market, pushing up prices.