Chinese refiners are set to cut crude throughput this month by about 6per cent, a scale last seen in the early days of the COVID-19 pandemic two years ago, to ease bulging inventories as recent COVID lockdowns undercut fuel consumption, industry sources and analysts said.
Refiners are expected to lower crude oil processing in April by 3.7 million tonnes, or 900,000 barrels per day (bpd), equivalent to 6.3per cent of average national throughput in the latest annual figures, according to estimates by six industry sources and analysts.
Slowing demand at the world’s top crude importer would help to cool global oil prices, which remain above $100 after touching 14-year peaks last month, buoyed in part by supply disruption fears following Russia’s invasion of Ukraine.
The slump in demand has also forced state refiners to export more fuel from their swelling inventories, countering government-led efforts to scale back overseas shipments after the Russia-Ukraine conflict stirred worries about supplies.
Companies are forecast to export approximately 2 million tonnes of gasoline, jet fuel and diesel combined this month, sources said, which could also allow Chinese refiners to reap the benefits of record Asian refining margins.
Customs data released on Wednesday showed that China’s crude oil imports fell 14per cent in March from a year earlier. Imports had been pressured by deteriorating margins at small, independent refiners and by seasonal maintenance, and with the added impact of sliding demand, further declines are expected in April.
China’s throughput data for March will be released next Monday.
Chinese fuel demand took a sharp downturn in March when worsening coronavirus outbreaks were met by widespread lockdowns, including three weeks of mobility restrictions in Shanghai, China’s largest city, to contain the highly contagious Omicron variant.
State refining giant Sinopec Corp, Asia’s largest refiner, is leading this month’s production cuts, lowering throughput by nearly half a million bpd, followed by an estimated cut of 170,000 bpd by China’s second-largest refiner, PetroChina, four sources familiar with the matter said.
“With the escalated COVID curbs, private car driving has tumbled with gasoline consumption in some regions down between 20per cent and 60per cent,” Chinese commodities consultancy JLC said this week.
Privately owned Zhejiang Petrochemical Corp, which operates the single-largest refining complex in China near Shanghai, lowered throughput by around 70,000 bpd this month versus March, two sources familiar with the matter said.
The sources declined to be named as they were not authorised to speak to the press.
Operating rates at smaller independent refiners are expected to slip as low as 45per cent this month, near a record low and down from 50per cent in March, according to JLC.
A Sinopec spokesperson declined to comment on specific throughput figures but said the refiner was ready to adjust operations in line with market conditions, adding that the firm had maintained reasonably low crude oil inventories in the first quarter.
PetroChina and ZPC did not respond to requests for comment.
The COVID-19 curbs, spanning 28 provinces and including particularly stringent measures among the consumption and manufacturing hubs in the east, hit gasoline demand the hardest, as millions of people were confined to their homes or quarantine facilities.
Aviation fuel was also hammered as commercial flights fell nearly 60per cent in March from a year earlier and last week hit their lowest since 2000, according to aviation data provider VariFlight.
Diesel consumption is also declining as trucking activities are impeded by the COVID curbs, which have stranded many drivers on China’s highways and forced factories to shut.