CHINA DATA: Improving demand, product supply shortage to buoy throughput in Q2

Singapore — China's crude throughput in the second quarter is likely to be buoyed by improving domestic demand and a shortage of oil product supplies due to the introduction of consumption taxes on light cycle oil and mixed aromatics, analysts said on May 17.

In the first month of Q2, the country's throughput edged up 0.1% at 14.15 million b/d in April from March even as heavy maintenance works led to the volume falling below the average 14.19 million b/d in the first quarter, showed data released May 17 by the National Bureau of Statistics, or NBS.

China's overall planned maintenance is expected to rise to 1.33 million b/d in April-June from 1.1 million b/d in March, S&P Global Platts previously reported. China had about 17.6 million b/d of refining capacity by end-2020, according to Sinopec's research institute.

A senior official with Sinopec said April 30 that the world's biggest refinery by capacity would raise crude runs at its operating refineries to compensate those shut for maintenance to meet improving domestic demand.

The independent refiner Zhejiang Petroleum & Chemical lifted run rates to 85% across its three 400,000 b/d crude distillation units in April, up from around 80% in March, which also supported China's throughput in April.

China's oil products demand improved in Q2 as production fully resumed after Lunar New Year holidays while public holidays in April and May helped leisure transport recover to levels prior to the COVID-19 outbreak.

Moreover, China's oil products exports in April were almost flat to March, at 6.82 million mt, data from General Administration of Customs showed.

These prevented the country's throughput in last month to see a notable fall, analysts said.

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

On a metric ton basis, throughput in April slipped 3.2% month on month at 57.90 million mt, while the volume in the first four months of this year rose 14.2% year on year at 232.1 million mt, the NBS data showed.

Throughput outlook

In the coming months, "refineries will need to raise runs, shift some yields to lift gasoil, gasoline production or curb oil product exports to meet domestic demand, as imported LCO and mixed aromatics are subjected to consumption tax," said Grace Lee, senior analyst with S&P Global Platts Analytics.

Beijing will levy a consumption tax on the two imported materials from June 12, making the gasoil barrels blended from imported LCO and gasoline barrels blended from mixed aromatics less competitive with those produced from refineries.

Therefore, China's crude throughput is expected to be supported as the tax dampens LCO and mixed aromatics imports. Platts Analytics projected China's crude throughput to be above 14 million b/d in Q2, and to rise higher to about 14.5 million b/d in the third quarter.

In contrast, the country processed 13.66 million b/d of crude in Q2 2020, and 14.05 million b/d in July-September last year, NBS data showed.

China's crude output rose 3.4% year on year at 4.01 million b/d in April, retreating from the four-year high 4.04 million b/d production in March, the NBS data showed.

As a result, the average crude production in January-April was 4.01 million b/d, up 2.7% year on year.

China's crude output, throughput:

(mil mt)

Source: National Bureau of Statistics