Oil Report

UPDATE 2-Oil-thirsty China to raise Kuwaiti imports by 50 pct

* Deal follows Iraq’s agreement to double exports to China

* Expected supply about 6 pct of China’s current total (Adds background on China’s oil demand)

BEIJING, Dec 30 (Reuters) - China has agreed to raise 2010 crude imports from Kuwait by 50 percent to about 240,000 barrels per day, trade sources told Reuters, with Chinese refiners set to to process at record rates as demand rebounds strongly.

The jump, which follows a one-third increase this year, comes after Iraq said it would more than double exports to the world’s second-largest oil consumer and Saudi Arabia agreed to a 12 percent increase for 2010. [ID:nTOE5BG07D] [nPEK268513]

“The deals have been finalised,” said a trade source familiar with the term supply agreements. “It’s a big increase.”

“Sinopec has raised the volume quite sharply,” said a second trade source.

The increases from Iraq and Kuwait, both of which supply mostly heavy, high-sulphur oil, are partly due to top exporter Saudi Aramco cutting back on similar grades Chinese oil refiners consider more economic to process, traders said.

But more importantly, it’s the expected demand increase from China that has led to the supply growth.

Sinopec Corp, Asia’s top refiner, has said it will raise crude throuhgput next year to 4.1 million bpd, 14 percent above the rates recorded in the first three quarters of this year.

China’s fuel demand is poised for an 8 percent expansion in 2010, more than double this year’s 3 percent, Sinopec’s president, Wang Tianpu, told Reuters last month, amid increasing signs of a strong economic recovery spurred by aggressive government spending.

Most oil from Kuwait, a member of the Organisation of the Petroleum Exporting Countries, goes to Sinopec 0386.HK and the rest to PetroChina 0857.HK, China's second-largest refiner.

The 240,000-bpd level would be about 6 percent of China’s current total crude imports of nearly 4 million bpd, and brings China closer to Kuwait’s top buyers such as Japan and South Korea.

China imported 28 percent more crude from Kuwait, now the country’s 7th largest supplier, in the first 11 months at 6.67 million tonnes, or 146,000 bpd, according to Chinese customs data. [O/CHINA1]

Kuwait, the world’s 7th largest crude exporter, aims eventually to export 500,000 bpd crude to China, or double the 2010 level, and is working to achieve that target by investing in a refinery or two in partnerships with Chinese state refiners.

Reporting by Chen Aizhu; Editing by Nick Macfie