A unit of PetroChina (NYSE: PTR; HKEX: 0857) has been ordered by Chinese authorities to cease trading off oil import quotas with local refineries.
The move, which is a part of China’s clampdown on fuel production surplus to reduce emissions, could cause purchases by independent refineries, or teapots, to drop by 12 million to 16 million tonnes annually, according to a Reuters report. That could reduce China’s crude imports by 3%.
In addition, the move could impact oil prices, which have recovered well beyond pre-pandemic levels. Currently, crude oil is trading at around $70 a barrel.
Originally, PetroChina Fuel Oil Co. Ltd. was ordered by authorities to stop re-selling crude oil and trading off quotas in April after conducting this practice for years. The Reuters report adds that the fuel oil unit teamed up with teapots to buy back refined products including diesel at a negotiated price, which was tough to agree upon.
"(The investigation) officially ends the years-long partnership between the company and teapots," an official said, as cited by Reuters.
While PetroChina will have to adapt to the changes, the outlook for the remainder of the year looks positive for the company. After the coronavirus pandemic hurt PetroChina’s profit in 2020, the company has forecasted that it can increase production by 1.5% and grow crude processing volumes by 5.9% this year.
It has also committed to bringing greenhouse gas emissions near net-zero by 2050 while making increased annual investments in clean energy.
At the close of trading Wednesday in Hong Kong, PetroChina’s stock rose 2% to HK$3.41 per share. Its New York stock was trading 1% higher at $43.80 per share, intraday.