China buys Angolan and Congolese oil as Iran war triggers scramble for more than 20 million barrels

Chinese independent refiners have turned to Angola and the Republic of Congo for crude oil as the war involving Iran disrupts supplies from the Middle East and intensifies competition for alternatives.

• Chinese independent refiners have bought Angolan and Congolese crude as supplies from Iran and Russia become harder to secure.
• The African cargoes form part of purchases exceeding 20 million barrels from West Africa, Canada and Colombia.
• Congolese Djeno crude reportedly sold at a premium of about $22 per barrel to Brent after trading at discounts in June.
• China’s seaborne crude imports could rise to between 8.5 million and nine million barrels per day.

The refiners have purchased at least two cargoes of Congo’s Djeno crude and one cargo of Angola’s Plutonio crude, according to a Reuters report⁠ citing traders and industry analysts.

The African purchases form part of a much larger buying campaign involving more than 20 million barrels of crude from West Africa, Canada and Colombia over recent weeks.

The 20-million-barrel figure covers all those regions and should not be described as the volume purchased from Angola and Congo alone.

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Chinese independent refiners, commonly called “teapots”, are seeking replacement supplies as attacks involving the United States and Iran restrict exports through the Strait of Hormuz. Availability of Russia’s ESPO crude has also tightened as larger Chinese refiners absorb more of the supply.

Brent crude has climbed above $100 per barrel amid the disruption.

Congo’s crude attracts a $22 premium

The surge in Chinese demand has produced a striking reversal for Congo’s Djeno crude.

A November-loading Djeno cargo was reportedly sold at a premium of approximately $22 per barrel over ICE Brent. The grade had been offered at discounts in June, before the latest disruption tightened the physical oil market.

The sharp increase does not mean Congo receives the entire $22 premium as additional government revenue. The quoted differential represents the cargo’s market price relative to Brent and can reflect quality, availability, freight and delivery conditions.

Angola’s Plutonio crude has also attracted Chinese buyers. Plutonio is produced from the Greater Plutonio development in offshore Block 18.

Trading companies including Trafigura and TotalEnergies were identified by Reuters’ sources as sellers involved in the transactions. However, the companies did not publicly confirm the individual deals.

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The identities of the Chinese refiners buying the African cargoes were also not disclosed.

Chinese refiners search for supplies

Nearly 10 independent Chinese refiners sent representatives to the annual Asia Pacific Petroleum Conference in Singapore to search for available cargoes and negotiate purchases, according to people who met the representatives.

The refiners account for approximately one-fifth of China’s crude imports, making their changing buying patterns significant for exporters.

Beyond Angola and Congo, Chinese buyers have purchased at least four cargoes of heavy Canadian crude. They have also sought oil from Colombia and explored the possibility of sourcing additional domestic crude from China’s Xinjiang region.

Competition has also raised the price of Russia’s ESPO Blend. November-loading cargoes were reportedly trading at premiums of approximately $12 per barrel over ICE Brent, with December supplies expected to become even more expensive.

Some independent refiners have struggled to secure Russian crude because larger state-backed companies, including Sinopec, have taken much of the available supply.

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African oil gains strategic value

The buying spree shows how disruptions in the Middle East are increasing the immediate value of African crude to Asian refiners.

Angola and Congo offer Atlantic Basin supplies that do not need to pass through the Strait of Hormuz. However, shipping the crude to China involves longer voyages and higher freight costs than bringing oil from nearby Middle Eastern producers.

China’s seaborne crude imports could increase to between 8.5 million and nine million barrels per day in the coming weeks, according to Kpler analyst Muyu Xu.

That would be a substantial recovery from approximately seven million barrels per day in July, although it would remain below the pre-war level of about 10 million barrels daily.

The purchases could increase further as Chinese refiners use their annual import quotas, rebuild inventories and attempt to meet domestic fuel demand.