The failure of a Chinese refinery to obtain letters of credit (L/Cs) for fuel purchases could precipitate regulatory change and hinder China's efforts to liberalise its oil market according to the Bloomberg news agency.

As a result of the failure to provide L/Cs, the China Petroleum and Chemical Industry Federation (CPCIF) has said it could review rules covering crude oil imports by new refineries.

L/C failures

Privately owned Baota Petrochemical Group Co Ltd failed to secure financing for 1.5 million barrels of crude oil.

It could not get L/Cs for two crude cargoes worth more than US$50 million it had ordered from oil traders, Vitol and Mercuria, according to Bloomberg, which cited two traders with direct knowledge of the transactions.

Market liberalization

Beijing started opening up China's oil market in 2015 when it allowed in 20 new companies to help break the crude purchasing monopolies held by state firms.

According to a CPCIF official, problems with credit could lead to the tightening of rules for new entrants and perhaps a review of existing quota holders.

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