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ANALYSIS: China's May crude stockbuild rises on lower refinery runs

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ANALYSIS: China's May crude stockbuild rises on lower refinery runs

Highlights

China experienced a surplus of crude supply in May as refiners usedlower volumes than were imported and domestically produced, implyingadditions to China's crude oil inventory, according to Platts analysis ofrecently released government data.

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The crude stockbuild averaged 592,000 b/d in May, the highest levelsince May 2012, when the stockbuild touched 1 million b/d on the back ofrecord high crude imports.

Platts calculates China's net crude stock drawdown or build bysubtracting refinery throughput from the country's crude oil supply, whichtakes into account net imports and domestic production of crude. The level ofstocks held by refiners is not disclosed.

The stockbuild last month continued from April amid low oil demandgrowth. Prior to that, there had been five consecutive months of netdrawdowns since November last year.

The higher stockbuild in May was due mainly to lower refinery operatingrates and a slight gain in net crude imports compared with April.

Refinery runs in May had fallen by 1.4% month-on-month to 9.24 millionb/d, according to National Bureau of Statistics data released June 9, whilecrude imports edged up 0.4% to 5.66 million b/d, according to data from theGeneral Administration of Customs released June 8.

Crude exports in May fell 39.5% year-on-year but rose 30% month-on-monthto 26,000 b/d, bringing net crude imports for the month to 5.64 million b/d,an increase of just 0.3% from April.

From January to May, China's stockbuild has averaged 198,000 b/d,compared with 453,000 b/d during the same period last year, mainly because ofhigher refinery runs and lower net crude imports.

REFINERY RUNS TO REBOUND FROM JUNE

Refinery runs in April and May fell compared with the first quarter ofthis year due to seasonal maintenance.

However, they are expected to have rebounded this month following thereturn of several major plants that were offline for maintenance, includingthe 120,000 b/d crude distillation unit in Daqing Petrochemical, the 160,000b/d CDU at Fushun Petrochemical and the 200,000 b/d Qinzhou refinery insouthern Guangxi province.

In addition, refiners are also likely to lift run rates as June is thestart of peak summer demand season, said Beijing-based 3E consultancy in itsChina Oil Monthly report released last week.

"Along with relaxed plant turnarounds and the market expectation ofseasonally increasing oil consumption toward early summer, domestic refinersare lifting overall plant operations in June."

However, fundamental oil demand still remains weak in China, and thiscould put downward pressure on runs, it noted, adding that average refiningcapacity utilization -- across state and independent refineries -- in Junewill continue staying below 63%. 3E said it expected low utilization in manyof state refiner China National Petroleum Corp.'s facilities across northernChina.

CHINA'S MAY NET CRUDE SURPLUS

CHINA'S JANUARY-MAY NET CRUDE SURPLUS

Sources: China's National Bureau of Statistics, General Administration ofCustoms

--Song Yen Ling, yenling.song@platts.com

--Edited by James Leech, james.leech@platts.com