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China's Aug crude runs dip 0.2% on month to 14.06 mil b/d, extending slight downtrend

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China's Aug crude runs dip 0.2% on month to 14.06 mil b/d, extending slight downtrend

Highlights

High throughput weighs on product inventory

Throughput downtrend seen likely to continue

Crude output rises 1.2% on month to 3.94 mil b/d

Singapore — China's domestic refineries processed 14.06 million b/d or 59.47 million mt of crude oil in August, edging down 0.2% month on month, extending a slight downtrend since hitting a record high in June, National Bureau of Statistics data released Sep. 15 showed.

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The country's crude throughput hit an all-time high of 14.14 million b/d in June before edging down 0.4% to 14.08 million b/d in July.

State-owned oil companies Sinopec, PetroChina, CNOOC and Sinochem lowered refinery run rates to around 82.8% in August from 83.1% in July, data collected by S&P Global Platts showed.

Privately owned Zhejiang Petroleum & Chemical also lowered run rates slightly to below 120% in August at its 400,000 b/d refining complex from around 130% in July.

But the independent refineries in Shandong province kept August crude runs unchanged from July at 72.7% in anticipation of a possible demand rebound in "Golden September and Silvery October," the usual peak demand season in autumn.

As a result, August was still only the third month on record that China's crude throughput has surpassed 14 million b/d, and was up a robust 9.2% year on year, the NBS data showed.

It also brought average January-August throughput to 13.16 million b/d, which was 2.8% higher than in 2019 on a barrels per day basis, following a year-on-year decline of 5.6% in the first quarter during the coronavirus pandemic.

BUCKING USUAL TREND

However, the relatively high throughput pushed up product inventories and could weigh on crude runs in the coming months amid weaker-than-expected product demand in China to date in September, market sources said.

This bucks the usual trend for China's refineries to boost throughput to year-to-date highs in September to meet robust oil products demand in autumn.

The COVID-19 pandemic, floods in southern China and recent typhoons in the northeast have not only interrupted construction work and transportation in 2020, but also destroyed crops, resulting in a lost harvest.

Gasoil stockpiled to meet autumn harvest demand is struggling to find homes this year, refiners said.

PetroChina, the country's second biggest refiner by capacity, has cut its crude runs in September to about 74% of capacity from 78% in August, Platts has reported.

The rest of China's refineries have no plans to make up for PetroChina's reduction. Some independent refineries, including an integrated one, even plan to follow PetroChina in cutting throughput amid weak margins and high product inventories.

Upstream, China's crude output went up steadily to 3.94 million b/d in August, rising 1.2% month on month and 2.3% year on year, the NBS data showed. Over January-August, the country's crude output rose 1.1% year on year to 3.91 million b/d.

The NBS releases data in metric tons, which S&P Global Platts converts to barrels using a 7.33 conversion factor.

China's crude output, throughput

(Unit: million mt)

Aug-20
Aug-19
change
Jul-20
Change
Crude Output
16.65
16.28
2.3%
16.46
1.2%
Crude Throughput
59.47
54.46
9.2%
59.56
-0.2%

Jan-Aug 20
Jan-Aug 19
% chg
Crude Output
130.15
128.23
1.5%
Crude Throughput
438.03
424.45
3.2%

Source: National Bureau of Statistics, China