Why do Shandong refiners buy fuel oil at all when they have crude quota?

Because the quota is finite and the secondary units are not. MOFCOM allocates non-state crude import quota in batches each year, and once a refiner has used its allocation it can keep its residue FCC and delayed coker running on imported straight-run fuel oil or waxy residue bought under a fuel-oil import licence. That is why the flow rises and falls with quota timing, and why 2025 imports fell when the tariff went to 3% and the consumption-tax rebate was cut: the arithmetic only works when the discount to crude covers the un-rebated tax. A buyer who cannot say which unit takes the residue and whether it holds the licence is not the buyer.

What is the difference between LSWR and LSFO 0.5%?

LSWR, low-sulphur waxy residue, is the atmospheric bottom of a sweet waxy crude such as Duri or Minas, sold by the refinery under a named grade (Pertamina's V-500 and V-1250 are the reference). It is low in sulphur (0.15 to 0.40%) and metals but has a pour point of +35 to +50 °C, so it needs heated tanks and coils from load to gate. LSFO 0.5% is the finished or straight-run fuel oil at 0.5% sulphur maximum, 180 to 380 cSt, pour point +15 to +30 °C, which a refiner can crack or a blender can sell as VLSFO. The refiner's choice depends on the coker's metals tolerance and the cutter stock it has; state the unit and the limits on vanadium, nickel, CCR and asphaltenes in the enquiry.

How is a genuine offer told from a fabricated one?

By where it loads and who signs the assay. A genuine cargo loads from a refinery shore tank at Santos or Rio, Dumai or Balikpapan, Lekki, Melaka or the US Gulf, with a certificate of analysis from the refinery and an SGS or Intertek certificate at that tank. The refinery, or its trading arm, sells it by tender or direct to a named principal, and payment is a letter of credit to the refinery's own account. Offers that come with tank-storage receipts, dip-test procedures, SCO/ICPO/FCO sequences, a 'private allocation', discounts of USD 30 to 60/t under the Singapore benchmark, or a load port that is a ship-to-ship position rather than a berth, are not offers CBIL works.

Which discharge ports and parcel sizes work?

Qingdao (Dongjiakou or Huangdao) and Yantai West Port take Aframax, LR2 and VLCC tonnage and connect by pipeline and rail to the Weifang, Zibo and Dongying refiners; Longkou takes up to 100,000 DWT and Dongying's offshore SPM 250,000 DWT with the inner harbour under 50,000 DWT. Parcels are 30,000 to 45,000 t on an MR for LSWR from Indonesia or Malaysia and 80,000 to 130,000 t on an Aframax or LR2 from Brazil, West Africa or the US Gulf. The discharge terminal is named in the enquiry, because one Rizhao crude terminal was designated in October 2025 and the desk fixes only to berths that pass the list checks.

How is the price expressed?

As a differential to a published benchmark, not a flat number: Platts or Argus Singapore Marine Fuel 0.5%, or MOPS 180 cSt, plus or minus a premium in USD/t, CFR or CIF the named port, with the pricing window (typically the five quotations around bill of lading date) written into the contract. The premium reflects grade, metals, pour point and the laycan. CBIL does not publish a level: a refiner's price is given against a named buyer, port and laycan, and it is valid for the hours the seller says it is.

North Asia · China

LSFO and LSWR Suppliers CFR Shandong (Qingdao, Dongjiakou, Yantai, Longkou)

The independent refiners' feedstock market: low-sulphur residue bought by Aframax and LR parcel when crude quota runs short

China's fuel-oil imports (HS 2710.19) were 21.6 million tonnes in 2025, 10.4% below the 2024 record, after the import tariff rose from 1% to 3% on 1 January 2025 and the consumption-tax rebate on fuel oil processed as feedstock was tightened, so that refiners run crude first and turn to fuel oil only when quota runs short. Within that total the clean refinery origins are the ones a buyer can document: Brazil supplied 1,041,204 t in 2025 at USD 482/t, up from 190,086 t in 2024, as Petrobras placed low-sulphur atmospheric residue in Shandong; Indonesia 689,600 t; South Korea 2,228,954 t; Singapore 3,310,484 t; and Brunei's Hengyi refinery 117,302 t of LSFO in 2024 at USD 596/t CIF. The buyers are the independent refiners of Weifang, Dongying, Zibo and Binzhou, which charge low-sulphur residue to residue FCC and delayed-coking units to make diesel and propylene without a desulphurisation bottleneck, and which need a fuel-oil import licence and a crude quota from MOFCOM to operate. Two grades are traded. LSWR is the atmospheric bottom of a sweet, waxy crude (Duri, Minas, Bach Ho and some West African grades): 0.15 to 0.40% sulphur, pour point +35 to +50 °C, 15 to 30% wax, vanadium under 15 ppm and nickel under 25 ppm, carried at 55 to 65 °C. LS SRFO or LSFO 0.5% is the straight-run or blended 280/380 cSt product: 0.30 to 0.50% sulphur, pour point +15 to +30 °C, vanadium under 35 ppm and nickel under 45 ppm.

CBIL brokers LSFO 0.5% and LSWR from Brazilian, Indonesian, Bruneian, Malaysian refinery, Nigerian and US Gulf refineries, CFR or CIF Qingdao (Dongjiakou or Huangdao), Yantai West Port, Longkou or Dongying, in 30,000 to 45,000 t MR and 80,000 to 130,000 t Aframax and LR2 parcels, priced against Platts or Argus Singapore Marine Fuel 0.5% or MOPS 180 cSt with a stated premium or discount. Fuels and feedstocks attract more fictitious offers than any other cargo, so the desk states its screening plainly: the producing refinery is named on the certificate of analysis, quality and quantity are certified by SGS, Intertek or an equivalent surveyor at the loading shore tank, the cargo loads from a refinery berth and not from a ship-to-ship transfer, the buyer gives its registered Chinese name and unified social credit code, and nothing is built on tank-storage receipts, dip tests, SCO, ICPO or FCO procedures or advance fees. Buyers and discharge terminals are checked against the OFAC, EU and UK lists before an offer goes out. A requirement that states the refinery, the grade with its sulphur, viscosity, pour point, CCR and metals limits, the discharge port, the laycan and the LC-opening bank gets a firm answer from a producing refinery; a round-number trial quantity from an unnamed buyer gets a question first.

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The market in figures

China fuel-oil imports, HS 2710.19, 2025: 21.6 million t (376,000 b/d), down 10.4% on the 2024 record
Documented refinery origins, 2025: Brazil 1,041,204 t @ USD 482/t · Indonesia 689,600 t · South Korea 2,228,954 t · Singapore 3,310,484 t · Brunei (Hengyi) 117,302 t in 2024 @ USD 596/t
Discharge ports: Qingdao Dongjiakou/Huangdao (VLCC, >23 m) · Yantai West Port (300,000 DWT) · Longkou (to 100,000 DWT) · Dongying (250,000 DWT SPM)
Grades: LSWR: S 0.15–0.40%, pour +35 to +50 °C, V <15 / Ni <25 ppm · LSFO 0.5% / LS SRFO: S ≤0.50%, pour +15 to +30 °C, V <35 / Ni <45 ppm
Tax and tariff: Import tariff 3% since 1 Jan 2025 (was 1%) · consumption tax RMB 1.2/litre (c. RMB 1,218/t) with a capped rebate on feedstock use

Official trade data; sources listed below. Landed values are the importing country's declared CIF, not CBIL prices.

Questions buyers ask

Why do Shandong refiners buy fuel oil at all when they have crude quota?: Because the quota is finite and the secondary units are not. MOFCOM allocates non-state crude import quota in batches each year, and once a refiner has used its allocation it can keep its residue FCC and delayed coker running on imported straight-run fuel oil or waxy residue bought under a fuel-oil import licence. That is why the flow rises and falls with quota timing, and why 2025 imports fell when the tariff went to 3% and the consumption-tax rebate was cut: the arithmetic only works when the discount to crude covers the un-rebated tax. A buyer who cannot say which unit takes the residue and whether it holds the licence is not the buyer.
What is the difference between LSWR and LSFO 0.5%?: LSWR, low-sulphur waxy residue, is the atmospheric bottom of a sweet waxy crude such as Duri or Minas, sold by the refinery under a named grade (Pertamina's V-500 and V-1250 are the reference). It is low in sulphur (0.15 to 0.40%) and metals but has a pour point of +35 to +50 °C, so it needs heated tanks and coils from load to gate. LSFO 0.5% is the finished or straight-run fuel oil at 0.5% sulphur maximum, 180 to 380 cSt, pour point +15 to +30 °C, which a refiner can crack or a blender can sell as VLSFO. The refiner's choice depends on the coker's metals tolerance and the cutter stock it has; state the unit and the limits on vanadium, nickel, CCR and asphaltenes in the enquiry.
How is a genuine offer told from a fabricated one?: By where it loads and who signs the assay. A genuine cargo loads from a refinery shore tank at Santos or Rio, Dumai or Balikpapan, Lekki, Melaka or the US Gulf, with a certificate of analysis from the refinery and an SGS or Intertek certificate at that tank. The refinery, or its trading arm, sells it by tender or direct to a named principal, and payment is a letter of credit to the refinery's own account. Offers that come with tank-storage receipts, dip-test procedures, SCO/ICPO/FCO sequences, a 'private allocation', discounts of USD 30 to 60/t under the Singapore benchmark, or a load port that is a ship-to-ship position rather than a berth, are not offers CBIL works.
Which discharge ports and parcel sizes work?: Qingdao (Dongjiakou or Huangdao) and Yantai West Port take Aframax, LR2 and VLCC tonnage and connect by pipeline and rail to the Weifang, Zibo and Dongying refiners; Longkou takes up to 100,000 DWT and Dongying's offshore SPM 250,000 DWT with the inner harbour under 50,000 DWT. Parcels are 30,000 to 45,000 t on an MR for LSWR from Indonesia or Malaysia and 80,000 to 130,000 t on an Aframax or LR2 from Brazil, West Africa or the US Gulf. The discharge terminal is named in the enquiry, because one Rizhao crude terminal was designated in October 2025 and the desk fixes only to berths that pass the list checks.
How is the price expressed?: As a differential to a published benchmark, not a flat number: Platts or Argus Singapore Marine Fuel 0.5%, or MOPS 180 cSt, plus or minus a premium in USD/t, CFR or CIF the named port, with the pricing window (typically the five quotations around bill of lading date) written into the contract. The premium reflects grade, metals, pour point and the laycan. CBIL does not publish a level: a refiner's price is given against a named buyer, port and laycan, and it is valid for the hours the seller says it is.

Sources

Hydrocarbon Processing, 'China's fuel oil imports slip in 2025 on weaker demand from refineries', January 2026, read 29 Sep 2026: 2025 imports 21.6 million t (376,000 b/d), down 10.4% from the 2024 record of over 24 million t; increase in the fuel-oil import tax in early 2025 and lower tax rebates softened demand; independents use fuel oil as an alternative feedstock when crude import quotas run out.
UN Comtrade public preview API, reporter China (156), HS 271019, imports, 2024 and 2025, as pulled in the Gemini sweep RESULT-2026-09-29-lsfo-lswr-shandong-both-sides.md (29 Sep 2026, desk verification pending): Brazil 190,086 t @ USD 610/t (2024) and 1,041,204 t @ USD 482/t (2025); Indonesia 315,962 t (2024) and 689,600 t (2025); South Korea 1,891,405 t and 2,228,954 t; Singapore 2,367,832 t and 3,310,484 t; world 35,867,879 t (2024) and 25,265,332 t (2025, partial-year customs total as reported at pull date). Hengyi Industries (Brunei) LSFO to China 117,302 t at USD 596/t CIF in 2024, same file.
Import tariff 1% to 3% from 1 January 2025; consumption tax RMB 1.20/litre (about RMB 1,218/t) with rebate deductions capped at verified yields: Gemini sweep, 29 Sep 2026, citing SAT (chinatax.gov.cn) and MOFCOM bulletins; desk verification pending. The tariff step is consistent with the Hydrocarbon Processing report above.
Grade specifications (LSWR sulphur, pour point, wax, V/Ni; LS SRFO 280/380): Gemini sweep section 1, 29 Sep 2026, drawn from Pertamina V-500/V-1250 and Platts Asia-Pacific refined-products methodology; typical values, contract per lot.
Port limits: Qingdao Dongjiakou VLCC to 450,000 DWT, draft over 23 m; Yantai West Port 300,000 DWT crude terminal, draft 23.5 m; Longkou to 100,000 DWT, fairway 15.5 m; Dongying 250,000 DWT SPM with inner port under 50,000 DWT: Gemini sweep section 5, 29 Sep 2026 (port company sites qingdao-port.com, yantaiport.com.cn, sd-port.com), desk verification pending.
Petrobras supplies the Shandong independents through storage at Dongjiakou; crude for Weifang refiners lands at Qingdao and moves by the 176 km Huangdao–Weifang pipeline: S&P Global Platts, 'China oil: Shandong refineries crude suppliers' and Platts pipeline report, as recorded in the desk file hongrun-peers-counterparties-2026-09-29.md.
Fuel-oil seller tenders as the legitimate sales channel (Pertamina LSWR Dumai/Balikpapan at MOPS 180 cSt plus premium; Dangote LS SRFO 65,000–128,000 t Aframax tenders, Business Post Nigeria March 2025; Petrobras low-sulphur RAT/LSFO 80,000–130,000 t): Gemini sweep section 2, 29 Sep 2026.
Buyer and terminal designations checked before offer: US Treasury OFAC press releases sb0472 and sb0476 (2025) and the OFAC teapot advisory (ofac.treasury.gov/media/935546) naming three Shandong independents and one Rizhao crude terminal in 2025; EU 19th package (23 Oct 2025) and UK list naming one further Shandong refiner: desk files dd-weifang-hongrun-lsfo-2026-09-29.md and hongrun-peers-counterparties-2026-09-29.md.
Shipping: fuel oil and residues carried under MARPOL Annex I in product and crude tankers (Aframax/LR2 for 80,000–130,000 t; MR for 30,000–45,000 t); charterers' vetting requires IACS class and International Group P&I cover: Gemini sweep section 6, 29 Sep 2026.