September 07, 2020 [Reuters] – South Korean refiners have bought nearly 2 million barrels of Omani crude from Chinese storage tanks in the past two months, seldom seen trades created by low prices and high inventories, according to trade sources and shipping data on Refinitiv Eikon.

The cargoes were among the first to be lifted from bonded storage tanks operated by Shanghai’s International Energy Exchange (INE) for delivery to South Korea, the sources said.

Strong buying from Chinese investors betting on a rebound in oil prices earlier this year pushed Shanghai crude futures to a premium over global benchmark Brent.

The trend reversed from July, though, prompting refiners to buy crude from the exchange at prices lower than spot supplies, the sources said.

One source with direct knowledge of the matter said SK Trading International in July bought 700,000 barrels of Omani crude from Litasco, trading arm of Russian oil producer Lukoil.

Another source said GS Caltex bought two Omani crude cargoes in July and August via traders from the exchange.

Three tankers delivered oil from ports in Shandong and Hainan provinces to Yeosu and Ulsan in the past two months, Refinitiv data showed.

Chinese refiner Hengli Petrochemical also made its first purchase from the INE in August, lifting a 500,000-barrel Upper Zakum crude cargo from Dalian storage, a source familiar with the matter said.

Middle East crude sold via the exchange are “a couple of dollars” cheaper than spot supplies, but procedures such as customs clearance are complicated, he said.

The sources declined to be named due to the sensitivity of the matter. SK Innovation owner of SK Energy – and GS Caltex and Hengli declined to comment.

Shanghai Futures Exchange, which owns INE, and Litasco did not respond to requests for comment.

INE’s storage peaked at more than 45 million barrels at end-July to early August, according to data on its website.

Buyers of INE crude have to be flexible as the cargoes typically ship within weeks and the crude grade and loading port are decided by the exchange, the sources said.

Asian refiners normally buy crude two months ahead.