Feedstock throughput at China's Shandong independent refineries is seen falling in March, reversing an uptick in February, as more units commence scheduled maintenance in the month, industry sources told S&P Global Commodity Insights March 21.
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The combined feedstock throughput at 43 surveyed refineries rose 1.4% month on month to 2.15 million b/d in February and was up 2.4% year on year, according to data from JLC, a local energy information provider.
Maintenance season for the sector began with Xintai Petrochemical shutting Feb. 20 and had been followed by two other refineries as of March 20, data collected by S&P Global Commodity Insights showed. The combined capacity of the three refineries is 7.5 million mt/year.
Another five refineries with a total capacity of 19.2 million mt/year are set to begin turnarounds in April and remain shut until May, sources said. March-June is typically the main maintenance season for Chinese refineries.
However, the total capacity scheduled for maintenance in the independent sector in Shandong is expected to be lower in 2023 than a year earlier due to strong refining margins.
Refining margins for independent refineries processing imported crude averaged Yuan 771 ($110)/mt in February, compared with Yuan 55/mt a month earlier, JLC data showed.
Products demand recovers further
Demand for automotive fuels is likely to increase further from March amid increased mobility and road travel in early spring as people travel freely following the easing of pandemic-led restrictions, sources said.
"Demand for gasoil from construction projects and agriculture will also increase further in March with operations resuming," an analyst with JLC said.
Production yields of gasoil against gasoline fell further to a 17-month month low of 1.66 to 1 in February from 1.75 to 1 in January as more gasoline was produced to cater to increasing demand.
With demand for gasoline and gasoil remaining robust, China's oil companies are expected to limit exports of both products in March, S&P Global reported previously.
Combined refinery feedstocks at ports rose 5% month on month to 8.48 million mt, or 62 million barrels Feb. 23 following heavy inflows. The stocks are likely to increase further in March amid slower delivery from ports to refineries during maintenance season, with feedstock inflows likely to remain heavy.
Shandong independent refineries imported 2.56 million b/d of feedstocks in February, up 1.9% from January, S&P Global data showed.
Fuel oil consumption at 19-month high
Around 12,927 b/d of fuel oil was processed by the surveyed refineries in February, a 19-month high since reaching 13,007 b/d in July 2021 and also up 294.4% from the 3,277 b/d cracked in January, JLC data showed.
Fuel oil imports surged 85.1% month on month to 944,000 mt in February, S&P Global data showed, amid good refining margins. Independent refiners typically turn to fuel oil imports when crude import quotas are a bit tight, and this trend is likely to continue in coming months as more fuel oil cargoes are expected to arrive in Shandong ports.
The expectation around mid-March was that around 17 fuel oil cargoes totaling 1.48 million mt would be discharged in the month, according to S&P Global data.
Bitumen blend consumption stable
In contrast to the increasing consumption of fuel oil, a relatively lower volume of bitumen blend was cracked by the independent refineries surveyed in February, mainly due to tight supply. Around 17,100 b/d of bitumen blend was cracked in February, down 2.9% from January, JLC data showed.
The price of bitumen blend remains on an uptrend, with the latest offer heard at a discount of $20/b to ICE Brent crude futures on a DES Shandong basis, about $3/b higher than deals concluded a month earlier, sources said.
Bitumen blend imports are likely to continue falling in coming months due to lower shipments from Venezuela, despite demand for asphalt for paving roads seasonally increasing from late March, sources said.
Shandong independent refineries' feedstocks:
(Unit: '000 mt)
|Jan-Feb 2023||Jan-Feb 2022||change|
|Total crude (b/d)||2,048||2,566||-20.2%|
Shandong independent refiners' top crude imports:
(Unit: '000 mt)
|Feb-23||Jan-23||% Change||Feb-22||% Change|
|Jan-Feb 2023||Jan-Feb 2022||% Change|