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CHINA DATA: Shandong independent refiners' throughput recovers to eight-month high in July

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CHINA DATA: Shandong independent refiners' throughput recovers to eight-month high in July

Highlights

Bitumen blend consumption soars 91% on strong demand

Feedstock inventories down to eight-month lows

Utilization rate falls in early August

Robust refining margins prompted China's independent refiners to ramp up feedstock consumption in July to the highest level in eight months, pulling down port inventories to eight-month lows. However, a fresh round of tax inspection as well as some refinery maintenance may put a lid on August consumption.

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Combined July feedstock consumption was at 2.36 million b/d, rising 7% from June to post the highest level since December 2021, data from local energy information provider JLC showed Aug. 11.

The consumption included various crude grades, bitumen blend and fuel oil. JLC's survey covered 40 independent refineries in Shandong with a combined capacity of 3.18 million b/d, accounting for about 17% of China's total refining capacity.

Higher feedstock consumption also helped cut overall feedstock inventories at ports by 3.1% month on month at 6.53 million mt, or 47.86 million barrels. Port inventories as of July 28 were at an eight-month low, signaling strong feedstock demand.

Feedstock inflows in July were up 34.3% from June to reach a six-month high of 15.15 million mt, or 3.58 million b/d.

Feedstock consumption was higher mainly because of strong appetite for bitumen blend. In July, about 1.44 million mt of bitumen blend was cracked by the surveyed refineries, rising 91% from 750,000 mt seen in June. Close to 10 independent refineries cracked bitumen blend in July, compared with six in June, according to JLC data.

This was attributable to improving margins for producing asphalt that was even more attractive than producing other oil products at times in July.

But start of a fresh round of inspection on tax issues in the oil refining sector, as well as a few refinery maintenance, will likely dampen independent refineries' feedstock intake in August.

As of Aug. 11, the average utilization rate for Shandong independent refineries fell to 66.2% from the 69.5% level seen two weeks earlier when the investigation was announced, according to JLC.

ESPO, Urals in favor

Among the crude feedstock cracked by independent refineries, ESPO was still the most favorable grade, with 1.925 million mt being consumed last month, up 39% month on month. It was also higher than 1.25 million mt cracked a year earlier.

ESPO is usually cracked in winter for the production of low-vapor gasoil, but currently many independent refineries were attracted by its low cost.

Due to relatively strong demand, premiums for September-arrival ESPO have already increased to $1-$1.50/b, with offers touching $3/b, on a DES Shandong basis, over ICE Brent futures, according to refinery sources.

At the same time, around 410,000 mt of Urals were consumed last month by independent refineries, compared with nil the previous month. Independent refineries have only started to receive discounted Urals barrels since June, and more cargoes are expected to arrive in the coming months.

The refineries preferred to blend Urals with ESPO to feed into their units, rather than West African grades that were much more expensive, due to the relatively higher sulfur content of Urals.

In addition, independent refineries also showed reduced appetite for Johan Sverdrup or Tupi due to higher costs. As a result, consumption of those two grades fell 27.3% and 59.5%, respectively, in the first seven months of the year, according to JLC data.

ZPC, Hengli throughputs slightly higher

Shandong independent refineries have favored lifting crude throughput due to good margins. Crude throughput at the two integrated refining complexes -- Hengli Petrochemical (Dalian) Refinery and Zhejiang Petroleum & Chemical -- was also slightly higher in July, according to JLC.

Combined throughput at the two refining complexes was around 860,684 b/d in July, up 3% on the month.

This was due mainly to the higher throughput at ZPC that witnessed runs rising 22% on the month to 643,148 b/d, while Hengli trimmed throughput due to maintenance.

Throughputs at Hengli decreased 30% from June to 217,535 b/d in July due to an ongoing maintenance that started in early July and is expected to last until late August.

Shandong independent refineries' crude feedstocks:

('000 mt)

Jul-2022
Jul-2021
change
Jun-2022
change
Imported crudes
6,797
7,940
-14.4%
6,607
2.9%
Shengli
155
105
47.6%
135
14.8%
Offshore China
1,323
946
39.9%
1,292
2.4%
Total
8,275
8,991
-8%
8,034
3%
Total (b/d)
1,957
2,126
-8%
1,963
-0.3%

Jan-Jul 2022
Jan-Jul 2021
change
Imported crudes
43,646
43851
-0.47%
Shengli
1,100
575
91.3%
Offshore China
7,485
4,680
59.9%
Total crude
52,231
49,106
6.4%
Total crude (b/d)
1,806
1,698
6.4%

Shandong independent refineries' oil products output, sales:

('000 mt)

Jul-2022
Jun-2022
change
Jul-2021
change
Output
7,170
6,411
11.8%
7,457
-3.9%
Sales
7,045
6,415
9.8%
7,484
-5.9%
Stocks
1,170
1,044
12.0%
1,411
-17.1%

Jan-Jul 2022
Jan-Jul 2021
change
Output
42,956
54,760
-21.6%
Sales
43,037
54,388
-20.9%

Shandong independent refineries' top crude consumption:

('000 mt)

Jul-2022
Jun-2022
change
Jul-2021
change
ESPO
1,925
1,385
39%
1,253
53.6%
Malaysia Blend
1,145
1,040
10.1%
0
NA
Oman
575
350
64.3%
690
-16.7%
Johan Sverdrup
430
665
-35.3%
1,055
-59.2%
Urals
410
0
NA
100
310%
Upper Zakum
370
270
37%
540
-31.5%
Murban
350
200
75%
190
84.2%
Mostarda
280
300
-6.7%
100
180%
CPC Blend
200
100
100%
0
NA
Kuwait
150
200
-25%
0
NA

Jan-Jul 2022
Jan-Jul 2021
change
ESPO
11,315
9,468
19.5%
Oman
4,850
4,480
8.3%
Malaysia Blend
4,655
0
NA
Johan Sverdrup
4,160
5,725
-27.3%
Tupi
2,470
6,100
-59.5%
Upper Zakum
1,500
4,120
-63.6%
Murban
1,382
1,770
-21.9%
Mostarda
1,080
1,300
-16.9%
Djeno
1,020
780
30.8%
Girassol
995
300
231.7%

Source: JLC