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CHINA DATA: July crude throughputs seen lower amid heavy maintenance

Highlights

State-run refineries cut utilization to 73.5%

Sinopec's utilization gains 1.5 percentage points

Unexpected slow gasoil demand recovery

China's crude throughput is likely to edge lower in July, weighed down by maintenance at state-owned refineries amid uneven oil product demand recovery and limited exports, S&P Global Commodity Insights data showed July 26.

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The country's four state-owned refiners trimmed their run rates to around 73.5% in July, just marginally above the two-year low of 73.4% in May, while the private integrated Hengli Petrochemical (Dalian) cut its utilization rate by eight percentage points from June.

The reduction is unlikely to be offset by a 1.5 percentage points utilization increase in the Shandong independent refineries, suggesting a collective throughput decline on the month in July.

For comparison, S&P Global's data covered 46 refineries with an average utilization of 75% in June, while official data showed the country's crude throughput rose 1.9% on the month to 54.94 million mt, but fell 9.7% from an year ago.

S&P Global polled 47 state-owned refineries in July, comprising 24 Sinopec refineries, 21 PetroChina refineries, CNOOC's Huizhou Petrochemical and Sinochem's Quanzhou Petrochemical refinery.

These refineries will process a combined 7.35 million b/d of feedstock in July against their combined capacity of 10 million b/d.

PetroChina and Sinochem led the fall due to maintenance, despite CNOOC and Sinopec raising throughputs slightly from June.

PetroChina's run at 28-month low

The 21 PetroChina refineries cut their average run rates by about five percentage points to 67.8% in July from June, a 28-month low, due mainly to maintenance at three of the polled refineries, S&P Global data showed.

The three refineries -- Huabei Petrochemical, Hohhot Petrochemical, as well as Dalian Wepec –- shut a combined compacity of 500,000 b/d for maintenance during the month.

In fact, PetroChina's actual utilization is lower than 67.8% as its Qingyang Petrochemical and Yumen Petrochemical in the northwest China was also under maintenance but its throughputs were not covered by S&P Global.

Meanwhile, Sinochem trimmed its Quanzhou Petrochemical's crude run about 17 percentage points from June, since its 60,000 b/d of crude distillation unit was shut for maintenance from July 1.

Uneven demand recovery caps utilization

In general, "demand for gasoline and jet fuel has improved during the summer holiday, but gasoil demand recovery is slower than expected with stocks staying high, capping production," a Beijing-based analyst said.

With the summer holiday season kicking off in July and movement curbs easing in most parts of the country, domestic travel picked up during vacation, supporting gasoline and jet fuel demand.

In addition, higher temperatures during the summer season also boosted demand for air conditioning, raising expectations that more gasoline will be burned, refinery sources said.

But gasoil demand from agricultural sector has weakened as the summer harvest ends, while demand from construction sector is poor due to cash flow problems, refining sources and analysts said.

Moreover, oil companies restricted oil product exports amid limited quota availability, leaving little room to lift crude runs, said a refinery source with Sinopec in South China.

Therefore, the top refiner Sinopec only slightly lifted its crude run to 76.5% in July from 75% in June, but it was too little to compensate for the cuts made by its state-owned peers.

Sinopec's Shanghai Petrochemical remains shut after an explosion in late-June. The refinery is scheduled to restart early-August, a company source said.

Independents run rates mixed

Compared to the controlled throughputs at state-owned refineries, the run rates at China's independent refineries were mixed.

Hengli started maintenance at one of its 200,000 b/d CDUs in early July, which would last till early August. As a result, the throughputs at Hengli were trimmed to around 74% in July, from 82% last month.

The run rate will likely return close to normal levels of around 80% in August after the maintenance, according to a refinery source.

The 800,000 b/d Zhejiang Petroleum & Chemical also slightly cut its utilization rate to 82% in July from 84% in June.

Run rates at Shandong independent refineries continue to recover as margins improve when cracking cheap feedstocks.

The average utilization rate at Shandong independent refineries recovered to around 70% as of July 20, up by about 1.5% from a month earlier, data from local energy information provider JLC showed.

And the run rates are likely to stay around 70% for the rest of July, given the relatively good margins, according to analyst with JLC.

State-owned refineries maintenance schedule

** PetroChina's 100,000 b/d Liaohe Petrochemical has restarted around June 16 from a maintenance since May 10.

** PetroChina's 120,000 b/d Karamay Petrochemical restarted from at around July 6 following a maintenance over May 20-July 5.

** PetroChina's Dalian Wepec will restart at around Aug. 23 after a maintenance that began May 25.

** PetroChina's 74,000 b/d Qingyang Petrochemical has been shut since June 10 for maintenance, which will last till Aug. 1.

** PetroChina's 50,000 b/d Yumen Petrochemical to restart at around Aug. 17 following a maintenance that began July 1.

** PetroChina's 100,000 b/d Hohhot Petrochemical, which was shut for maintenance from July 15, will restart at around Sept. 7.

** PetroChina's 200,000 b/d Huabei Petrochemical to restart from maintenance around Aug. 20, after being shut since July 1.

** Sinopec's Shanghai Petrochemical to restart in mid-August following the completion of maintenance that began mid-June.

** Sinochem's Quanzhou Petrochemical shut one 60,000 b/d crude distillation unit since July 1 for maintenance, which will last till September.

AVERAGE RUN RATES AT CHINA'S TOP REFINERS

State-owned
Jul-22
Jul-21
Jun-22
Jan-Jul 22
Jan-Jul 21
PetroChina
68%
73%
71%
72%
73%
Sinopec
77%
88%
76%
80%
85%
CNOOC
91%
96%
88%
87%
87%
Sinochem
71%
95%
88%
79%
100%
Subtotal average
74%
83%
75%
77%
81%

Private sector:
Jul-22
Jul-21
Jun-22
Jan-Jul 22
Jan-Jul 21
Hengli
74%
105%
82%
88%
106%
ZPC
82%
81%
84%
84%
79%
Shandong independents
70%
68%
66%
64%
75%

Source: S&P Global Commodity Insights