Oil Daily | China Boosts Crude Imports Amid Refinery Overcapacity and U.S. Sanctions on Iranian Oil

【Global Oil Supply and Demand】

Egypt's oil and gas production is on the rise after four years of decline, easing the country's import bill. Since August, natural gas production has increased by over 200 million cubic feet per day, reducing the fuel import bill by $3.6 billion and settling $1 billion in arrears with international partners.

Two independent Chinese refiners have purchased 4 million barrels of crude oil from Brazil and Angola for delivery in November. These refineries, previously owned by state refiner Sinochem Group, are part of China's vast refining capacity, which is currently facing overcapacity issues. The Chinese government is planning to shut down smaller refineries and upgrade larger ones to increase competitiveness.

A recent discount on Iranian crude oil in China has increased to over $6 per barrel compared to the ICE Brent price due to new U.S. sanctions affecting imports at key oil import hubs in Shandong province. Despite sanctions reducing shipments, China continues to amass crude inventories at a rate of about 1 million barrels per day, a trend that could continue until 2026 if oil prices remain stable.

【Oil-Producing Countries Dynamics】

OPEC is deliberating over how to define the maximum production capacity of its members, which will impact 2027 production baselines and potential output quotas. The UAE seeks higher quotas due to increased capacity investments, while other African members fear losing their standing. The outcome will affect market share distribution in a potentially tight global supply scenario.

Recent Ukrainian drone attacks have damaged Russian oil refineries and export facilities, leading Transneft to warn producers of possible lowered crude oil volumes on its system. This follows damage to major sites such as the Ryazan refinery and Primorsk export port, which has disrupted Russian oil handling and distribution.

【Latest Oil Policies】

Egypt has launched a new oil and gas bid round, inviting international companies to bid for 13 offshore and onshore blocks in an effort to boost domestic production. The bidding deadline is September 30, 2025, and includes six new exploration areas and seven undeveloped discoveries, as the nation faces increased LNG import demands.

Al Gore criticizes President Donald Trump for pressuring countries to revise their climate targets, claiming the administration is slowing the energy transition. This comes as Trump officials warned the EU about potential trade risks from its focus on net zero and new regulations. The EU has delayed a decision on its 2040 emission-reduction target, with member states expressing concerns about the proposed 90% reduction target.

The European Union is addressing energy grid bottlenecks to prevent high and volatile electricity costs, with plans to focus on eight critical infrastructure bottlenecks. This decision follows a major power blackout in Spain and Portugal in April, highlighting the need for better grid integration and efficient use of interconnectors to avoid energy disruptions.

【Industry News】

In recent months, UK supermajor BP has started production from the second development phase of the Raven field offshore Egypt, which involves the subsea tieback of additional Raven infill wells to its existing onshore infrastructure as part of the West Nile Delta (WND) project. BP has also discovered new gas in the North Alexandria Offshore Concession, with plans to connect it to the WND Gas Development.

Shell has connected six new wells at the West Delta Deep Marine and announced the final investment decision to develop the Mina West gas discovery in Egypt's Mediterranean Sea. This marks continued investment in Egypt's energy sector, aiming to boost its production and reduce dependency on imported LNG.

Two independent Chinese refiners, Qicheng Petrochemical and Qirun Petrochemical, have acquired bankrupt refineries from Sinochem Group and bought a combined 4 million barrels of crude from Brazil and Angola for November delivery. China's high oil refining capacity is facing overcapacity, with government plans to shut down smaller refineries and upgrade larger ones to enhance competitiveness.

Plains All American Pipeline is dealing with a crude quality issue on its Permian-to-Corpus Christi route, where sulfur compounds exceeding safe limits have been detected. The company warned shippers of a fee for off-spec deliveries and is investigating the contamination cause. Corpus Christi, a major export hub, could face disruptions if the issue persists.

【Company News】

In a bid to revitalize its domestic production, Egypt has settled $1 billion in arrears owed to international partners. This comes while the UK supermajor BP and Shell have recently made new gas discoveries and development decisions offshore Egypt as part of ongoing projects.

Chevron CEO Mike Wirth discussed the company's dual strategy of expanding traditional fossil fuel operations and investing in low-carbon technologies. Wirth emphasized the need for ongoing investment to meet global energy demand, despite predictions of oil demand peaking by the end of the decade. Chevron plans to allocate $10 billion toward lower-carbon initiatives between 2021 and 2028.

Plains All American Pipeline is addressing a crude quality issue on its Permian-to-Corpus Christi system, related to high levels of sulfur compounds. Starting October 1, Plains will impose a fee on off-spec deliveries. The situation could disrupt operations, as Corpus Christi exports over 2 million barrels daily, with many relying on Plains’ pipelines.