Trader Mercuria sees strong Urals demand from China

SINGAPORE, Jan 24 (Reuters) - Oil trader Mercuria said on Thursday that Chinese refiners have expressed strong demand to buy more Russian Urals crude, and that it had not seen any sign of a desire by Sinopec Corp to reduce its annual supply deal.

A person familiar with Sinopec's (0386.HK) term deal to buy Urals from Mercuria, which has been running for several years, told Reuters on Wednesday that the Chinese firm wanted to reduce the agreement by a third to about 80,000 barrels a day.

The deal, which runs for 12 months from May, is due for renewal in the coming months. The person said that Chinese refiners didn't like the oil. Sinopec is Asia's biggest refiner.

"We have no indication that Sinopec wishes to reduce the Urals crude volume it is receiving through contracts with our company," David Ensor, Vice President for Communications at Mercuria, told Reuters in an email.

"Within the last 10 days, we have received indications from more than one Chinese refinery that they are interested in increasing the volume of Urals crude they receive through us."

On Wednesday a Sinopec trading manager had declined to comment on a possible reduction in the volume, but said if there was one it would be because of much higher cost of the crude oil versus competing grades from the Middle East.

Russia retained its ranking as the fourth-largest crude supplier to China last year, but its share of supply dipped to 9 percent from 10 percent in 2006, official Chinese customs data has shown.

In 2007, Russia, the world's second-largest oil exporter, sold 9 percent less crude to China at 14.53 million tonnes (290,000 bpd) versus a year ago, or 45 percent below the amount top supplier Saudi Arabia exported to China, customs data recorded. (Reporting by Jonathan Leff; Editing by James Jukwey)