UPDATE 2-China's 2017 crude oil quotas exceed last year's, teapots take a cut

* 2017 quotas total 91.73 mln T, vs 87.6 mln T for 2016

* Volumes for so called teapot refiners down 17 pct

* Independents already barred from fuel export (Adds detail, quotes)

BEIJING/SINGAPORE, June 19 (Reuters) - China last week issued a second batch of crude oil import quotas under the so-called “non-state trade” that is higher than for all of the allowances in 2016, but allotments to independent refineries were lower than a year earlier.

The lower grants to the independents dealt the new group of crude oil buyers another blow because they were already barred from exporting refined fuel, squeezing margins in an oversupplied domestic fuel market.

The Ministry of Commerce approved 22.92 million tonnes to 32 companies, against 29 recipients in the first issue for 2017, according to a document dated June 14 and viewed by Reuters on Monday.

The 32 companies included mostly independent oil refineries, also known as teapots, and some state-run companies.

That latest quotas take the total issued this year to 91.73 million tonnes, compared with 87.6 million tonnes in 2016. The second batch will be valid until year-end.

Volumes for the 19 independent oil plants that make up two thirds of the total issues for 2017 dropped by 12.36 million tonnes, or nearly 17 percent, from last 2016.

“The message is pretty clear: the government is tightening the screws as the industry is heavily oversupplied,” said a Beijing-based trading executive who deals with independents.

“Those who have not played by the rules, under-using quotas for instance, are taking a bigger cut.”

Four independents -- Baota Petrochemical, Wonfull Petrochemical, Haiyou and Chambroad -- took the deepest cuts, between 43 percent and 90 percent, according to data Reuters compiled based on official documents.

Uncertainties over the time and the size of issues have led some independents to scramble for purchases, resulting in brimming fuel stocks and port congestion.

“We are rushing to buy as much crude as we can because we thought the government is going to issue second batch of quotas based on the volumes (used) in the first half of the year,” said a trader with Shandong Wanda Group, owner of Tianhong Chemical.

“That led to higher running rate as we don’t have enough storage ... and in turn a glut of refined products.”

The Ministry of Commerce did not immediately respond to request for comment.

Company officials at five independent refiners told Reuters that they have received a second batch of crude import quotas.

Beijing approved the oil quotas under the “non-state trade” designation, so they do not include state-owned oil companies Sinopec, China National Petroleum Corp, Sinochem Group, China National Offshore Oil Corp and Zhuhai Zhenrong Corp

The increased quotas buoyed the price of Oman crude on the Dubai Mercantile Exchange to its narrowest discount against Dubai swaps in four sessions. China buys most of Oman’s crude output.

Reporting by Chen Aizhu and Meng Meng in BEIJING, Florence Tan and Mark Tay in SINGAPORE; Editing by Christian Schmollinger and David Goodman