China's crude throughput seen extending gains in May on deluge of cheap oil

Singapore — Crude oil throughput at China's domestic refineries is expected to continue upward momentum in May, as companies make room for excess crude purchased at ultra-low prices in March, analysts told S&P Global Platts Friday.

According to Klper, a trade flow tracker, China's seaborne crude imports is expected to reach 344 million barrels (11.1 million b/d) in May, up 37.6% from April.

China's crude imports in April, both by water and land transportation, stood at 9.88 million b/d, data from General Administration of Customs showed.

Meanwhile, the benchmark front month ICE Brent futures plunged to $22.88/b March 30 from the monthly high $52.71/ on March 3.

The price slump encouraged Chinese buyers to grab cheap crude set for delivery in May and June.

"Chinese refineries have to ramp up utilization rates in order to digest the crudes flood in May/June, the cargoes of which were taken in March when crude price plunged," a Beijing-based analyst said.

The month-on-month increase in May, however, is likely to be capped by a significant decline in oil product exports and some scheduled maintenance, a Singapore-based analyst said.

A senior official with Sinopec said in late April that the company would prefer to focus on domestic sales over exports as international oil product crack spreads slipped into negative territory.

"Refineries do prefer to sell oil products in domestic market. Exports incur losses," a source with PetroChina said.

Healthy margins boost April throughout

Healthy domestic margins boosted utilization both in state-owned and independent refineries in April.

As a result, China's crude throughput in the month edged up 0.8% on the year to 13.16 million b/d or 53.85 million mt in April, posting the first uptick since the coronavirus outbreak, National Bureau of Statistics data released Friday showed.

On barrels/day basis, the volume rebounded 11.2% from 11.83 million b/d in March and a bottom level in February, when the country was under lockdown to contain the coronavirus outbreak. NBS did not release monthly throughput data for February.

"The refining margin is good now, and it's the best time for refineries with the $40/b floor price for oil products in China," a source with an independent refinery in Northeast China said in April.

S&P Global Platts' survey showed that the three state-owned oil giants -- Sinopec, PetroChina and CNOOC -- lifted their utilization by six percentage points to 76% in April from March, while the private Hengli Petrochemical (Dalian) independent and Zhejiang Petroleum and Chemical, 400,000 b/d each, maximized their operation rate to 115% and 120% in last month, respectively.

Moreover, average run rate in the small scale independent refineries in Shandong even hit second historical high of 73.5% in April from 55.1% in March and 44% in February.

Over January-April, China processed 12.33 million b/d of crude, down 4.2% year on year.

NBS releases data in metric tons, which Platts converts to barrels using a 7.33 conversion factor.

The country's crude output was also stable in April at 3.88 million b/d, edging up 0.9% year on year, the NBS data showed.

Over January-April, the country's crude output rose 2% year on year to 3.9 million b/d, the data showed.

CHINA'S CRUDE OUTPUT AND THROUGHPUT

Source: China's National Bureau of Statistics

Unit: million mt