CHINA DATA: Shandong independent refiners' run rates likely to fall further in Feb

Singapore — The average utilization rate at China's independent refineries in eastern Shandong province is likely to fall further in February, with several refineries scheduled to shut for maintenance, while narrowing domestic refining margins amid a recent spike in crude oil and feedstock prices prompt the fuel producers to reassess their near-term output plans.

In January, the refineries cut crude throughputs by about one percentage point on the month to 74.3%, according to a survey by local information provider JLC.

The lower run rate was attributed to a few refinery shutdowns, including Haiyou Petrochemical, Kenli Petrochemical and Chengda New Energy.

The 3.5 million mt/year Haiyou Petrochemical has shut its entire plant in end-January for an overall maintenance, with a restarting data unfixed as yet. Prior to this, Kenli Petrochemical and Chengda New Energy also had shut for a few weeks due to some unstable facility conditions.

The refining margin for cracking imported crude has fallen by Yuan 208/mt ($30/mt) from December 2020 into negative territory at minus Yuan 43/mt ($6/mt). This was the first month for the sector to register refining losses after hefty profitmaking during 2020.

This was mainly due to rocketing crude prices in the international market, market sources said.

In addition, independent refineries are required to pay the government's oil price risk fund for 2020 by end February, which is at average Yuan 600-700/mt for gasoil and gasoline sold during March 18-June 11 last year. This could also eat into their cash flow.

Total feedstock down

In line with the decline in utilization, total feedstock consumption in January fell 5% from December 2020 at 10.5 million mt, or 2.48 million b/d. It was still 15.3% higher from a year earlier, and 3.5% higher from the average of 10.15 million mt/month in 2020.

However, the planned maintenance over the second quarter will likely trim feedstock demand in the coming months.

The month-on-month decline in throughput combined with a 25% rebound in crude imports from December to push up crude inventory in Shandong to 216.3 million barrels in January, compared with 212.7 million barrels in the previous month.

Crude imports for Shandong independent refineries were at 13 million mt in January and 10.4 million mt in December 2020, respectively, S&P Global Platts data showed.

Johan Sverdrup tops second

Johan Sverdrup became the second-most imported crude feedstock in January, surpassing Lula that was usually in the second position in 2020.

This comes despite a 2.5% month-on-month consumption drop to 790,000 mt in January.

The grade's rising popularity was backed by higher production from Norway and its competitive price strategy, which is expected to continue sustaining its ranking in 2021.

Over 2020, total consumption of Johan Sverdrup rocketed to 8.48 million mt from nil in 2019, to chase closely with Brazil's Lula.

Murban was the most favored crude from the Middle East, with 430,000 mt consumed in January -- stable on the month.

Cold Lake was still making up its way to the fifth position, the first time in a few months.

Wonfull Petrochemical, Qingyuan Petrochemical and Chambroad Petrochemical cracked a total 390,000 mt of Cold Lake crude in January, up 2.6% on the month.

Shandong independent refineries' crude feedstock ('000 mt):

Oil product output, sales ('000 mt):

Top imported crudes cracked by Shandong independent refineries ('000 mt):

Source: JLC