SINGAPORE: China’s oil refinery utilisation rates are easing from record third-quarter levels as thinning margins and a shortage of export quotas discourage plants from raising output for the rest of 2023, according to traders and industry consultancies.
The drop in refining output could reduce crude demand from the world’s top importer and cap global oil prices, pushing up China’s crude inventories and dampening prices from top supplier Russia.
China is expected to process 15.1 million barrels per day (bpd) in November, down from 15.37 million bpd in October, consultancy FGE said, primarily because of run cuts at small independents, known as teapots, and state refiners.
“Refineries should be mulling marginal run cuts due to limited export quotas left for the remainder of this year,” Mia Geng, FGE’s head of China oil analysis, told Reuters, referring to state refiners.
“On top of that, we are already seeing stock builds for transportation fuels on weakening demand.”
State refiners, which cashed in on lucrative fuel exports earlier in the year, see little incentive to boost throughput as Beijing is unlikely to release more fuel export permits this year.
“Margins are almost disappearing as we’re processing higher-priced crude while demand for refined fuel is weakening,” said an official at a Sinopec refinery, declining to be named, adding his plant is trimming runs by about 20,000 bpd this month to the lowest level this year.
“Poor industrial demand for petrochemicals is not helping.”
Consultancy Energy Aspects trimmed its forecast for China refining runs in November and December by 100,000 bpd to an average of 15.65 million bpd in the fourth quarter.
Source: CNA
