China Crude Fell To A 28 Month Low In July

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China’s crude throughput fell to a 28-month low of 12.58 million b/d in July, depicting a surprise 6.3% month-on-month decline against a rise expected by some refining sources and analysts, says an article published in S&P Global.

COVID resurgence

The country’s crude throughput fell 3% month on month on a metric ton basis to 53.21 million mt in July, National Bureau of Statistics data showed Aug. 15. The NBS releases data in metric tons, which S&P Global Commodity Insights converts to barrels using a 7.33 conversion factor.

China’s crude throughout was last lower at 11.81 million b/d in March 2020 soon after the emergence of COVID-19.

S&P Global data had earlier showed Chinese refineries’ utilization would decline from June but remain above the two-year low in April when a resurgence of COVID-19 led Shanghai and other industrial cities to impose lockdowns.

Trimmed run rate

The country’s four state-owned refiners trimmed run rates to about 73.5% in July, from 75% in June, marginally above a two-year low of 73.4% in May. The 400,000 b/d private Hengli Petrochemical (Dalian) refinery cut its utilization rate by eight percentage points month on month to 74% in July, while the 800,000 b/d Zhejiang Petroleum and Chemical refinery reduced it by two percentage points during the same period to 82%. 

But crude runs at the refineries hovered above 70% and 80%, respectively, in April, according to S&P Global data.

Crude throughput at small-scale independent refineries in Shandong province was at 1.96 million b/d in July, 32.2% higher than April but down 0.3% from June, data from local information provider JLC showed.

Slower recovery

Moreover, a crude inventory reduction in July amid an increase in crude supplies suggested a healthy crude throughput during the month instead of a decline, analysts said.

China’s July crude inventory declined 34.57 million barrels from June, according to data intelligence Kpler, which monitors 1.53 billion barrels of crude storage capacity in China. Crude supplies, comprising imports and output, rose 10.62 million barrels on the month, NBS and customs data showed.

“There is no reason to cut throughput by 6% as domestic demand recovers after a cluster of localized COVID-19 lockdowns in the second quarter, although the recovery is slower than what we expected in early July,” said a Beijing-based analyst, who had estimated a month-on-month increase in the July crude throughput.

NBS revises data

The July volume led China’s crude throughput to decline 6.3% year on year to 380.27 million mt, or 13.15 million b/d, over January-July, according to NBS data.

The latest NBS data suggests that the country’s first half, 2022 crude throughput stands at 327.06 million mt (13.25 million b/d), lower than the 332.22 million mt volume published by the bureau along with China’s H1 volume and Q2 gross domestic data July 15.

“This suggest NBS revised the throughputs in H1, most likely concentrate the downward adjustment in Q2,” a Singapore-based analyst said, adding that NBS revises its statistics from time to time. “With the revise, the July throughput would be higher than that in May and April even on a barrel-per-day basis to meet the reality.”

The NBS did not release an official adjustment to the H1, 2022 data as of Aug. 15 and was not reachable for comment.

Upstream output grows

China’s crude production rose 3% year on year to 17.13 million mt, or 4.05 million b/d, in July, according to the data. The output was down 3.6% from a 6 1/2-year high of 4.2 million b/d in June.

The country’s total crude production over the first seven months of the year gained 3.7% year on year to 120 million mt, or 4.15 million b/d, amid efforts by state-owned oil giants to ensure national energy supply security.

China’s state-owned companies have announced increasing domestic oil and gas reserves from conventional and unconventional resources, supporting the country’s upstream production growth.

The unconventional resources include Sinopec’s Shunbei deep onshore field in the Tarim Basin, Xinjiang Uygur autonomous region, shale oil and gas from the aging eastern China Jiangsu field, and the first offshore shale oil resource in CNOOC’s Beibuwan Basin.

As Asia’s top consumer, China imports more than 70% of its crude supplies and about 40% of natural gas.

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Source: S&P Global

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