CHINA DATA: Independent refiners' Jan throughput beats expectations on firm gasoline sales

Despite the reduced number of working days in January, feedstock consumption at China's Shandong independent refineries surpassed industry expectations amid sharply improved refining margins.

Shandong independent refineries' feedstock consumption was steady at around 8.99 million mt, or 2.12 million b/d, in January from a month ago, data from the local energy information provider JLC showed Feb. 9.

The January feedstock consumption was better than industry expectations, as China's private refining sector typically posts sharply lower run rates and throughput levels during the month of the Lunar New Year holiday, when the nation's overall fuel demand falters, in line with slower business and industrial activity.

However, people mobility and transportation fuel demand surged last month, as COVID-19 cases began to sharply come off from the peak level, leading to robust refining margins and providing independent refiners incentives to boost throughput.

Reflecting the sharp increase in transportation fuel demand, refining margins for independent refineries improved to around Yuan 692 ($101.8)/mt as of Feb. 1, compared to losses of around Yuan 315/mt recorded on Jan. 4, JLC said.

Looking ahead, refinery and industry sources expect China's oil products demand to keep improving, as the government focuses on boosting economic activity in 2023.

"Good margins will support independent refineries' throughputs in February, but the growth would be capped as a few refineries have previously planned to shut for maintenance," said an analyst with JLC.

Zibo-based independent refinery Xintai Petrochemical, for one, plans to shut for maintenance from late-February, according to JLC.

Gasoline sales reach 13-month high

The private refining sector's total oil product sales rose 9.6% on the month to 6.8 million mt in January, marking the highest level in five months on robust automotive fuel demand, according to JLC data.

Gasoline sales especially outperformed in January, as demand for the automotive fuel rose following increased mobility and road travel amid easing pandemic-led restrictions, analysts and industry sources said.

Gasoline sales rose 13.4% on the month to a 13-month high of 2.5 million mt in January. They were last higher in December 2021 at 2.67 million mt, the JLC data showed.

Reflecting the surge in gasoline consumption and sales, the fuel's stock level within the private refining sector fell 17% on the month to a four-month low of 430,000 mt in January.

The production yield of gasoil against gasoline has also fallen to an eight-month low of 1.75 to 1 in January as more gasoline was produced.

Taking the faltering gasoline stock levels and surging demand for the automotive fuel, China's oil companies are expected to limit or reduce gasoline exports in February, S&P Global reported previously.

Bitumen blend demand stays strong

Among other products, demand for bitumen blend as a feedstock to produce asphalt fell 8% on the month to a seven-month low of 835,000 mt in January, as colder-than-average temperatures limit road paving and general construction activities, JLC data showed.

Looking ahead, however, easing COVID-19 restrictions are likely to fuel infrastructure construction projects, while warmer weather will kick start road paving and maintenance works, analysts said.

Market and refinery sources also indicated that the margins for producing asphalt has been improving in recent weeks amid expectations of stronger demand, while production costs have fallen on lower international crude prices.

"The demand for asphalt will likely increase from around late-March or early-April ... some downstream buyers have already started to pile up stocks as they anticipate [strong] demand from the infrastructure construction projects," said a Shandong-based analyst.

Bitumen blend cargoes changed hands at a discount of around $23/b against the ICE Brent Futures on a DES Shandong basis in recent weeks, compared with a discount of around $29/b seen traded a month earlier.

In January, around 1.57 million mt of bitumen blend was discharged into Shandong and Tianjin ports for independent refineries, about 24.9% lower from a month earlier, according to S&P Global data.

Shandong independent refineries' feedstocks consumption ('000 mt)

Top imported crude consumption by Shandong independent refineries ( '000 mt)

Shandong independent refineries' oil product output, sales ('000 mt)

Source: JLC