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CHINA DATA: Fall in Sep oil product stocks likely to support independent refineries' Oct throughput

Highlights

Margin of refining imported crude up $1.80/b

Cracks more domestic crude as import quota tight

Feedstock inventory rises as imports up

China's independent refineries' gasoil and gasoline stocks slumped in September as the growth in demand outpaced that of production, which in turn would help buoy these plants' throughput in October, data from local information provider JLC showed Oct.12.

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Gasoline inventory dropped 31.7% from August to 656,400 mt, accounting for 17.5% of its storage capacity, while gasoil stock fell 33.9% month on month to 760,500 mt in September, to occupy 15.8% of capacity.

September and October are typically a seasonal peak for gasoil consumption to meet demand from mining, construction and harvesting activity, despite slightly slower demand from the transportation and industrial sectors due to power rationing starting late September.

Meanwhile, a slight relaxation in traffic controls due to fewer COVID-19 lockdowns encouraged gasoline consumption during the Mid-Autumn Festival holidays in late September.

In addition, inventories of light cycle oil and mixed aromatics -- blending materials for gasoline and gasoil -- dropped as the new consumption tax disrupted imports.

Throughput up

In a bid to meet demand, independent refineries boosted throughput in early September with several plants in Shandong restarting operations after maintenance.

But throughput volumes fell subsequently due to strict environmental investigations and electricity rationing at Shandong province, home to China's small independent refineries.

As a result, throughput at the province's independent refineries inched 0.4% higher to 9.5 million mt (2.32 million b/d) in September, from a 17-month low in August, which led to the significant reduction in product inventory, the JLC data showed.

This was equivalent to 67.1% of the refineries' capacity in September, compared with August's 66.8% utilization rate, S&P Global Platts' calculation showed.

Meanwhile, the integrated Hengli Petrochemical (Dalian) in Liaoning province raised its utilization rate to 97% to process 1.59 million mt of crude in September, from 95% in August.

The Zhejiang Petroleum & Chemical lifted its daily throughput by 2.1% to 56,000 mt from August, the information provider's data showed.

JLC said rising oil product margins, low inventory and good demand will support independent refineries' throughput in the short term.

Refining margins for imported crude rose Yuan 83/mt ($1.76/b) to Yuan 530/mt in September, according to JLC.

Feedstocks

Despite a slight month-on-month rise in Shandong independent refineries' throughput, their consumption of imported crude declined 2.1% to 7.11 million mt from August due to limited crude import quotas, the JLC data showed.

Moreover, their straight run fuel oil consumption was little changed from August at 50,000 mt, while bitumen blend fell 7.9% month on month to 82,000 mt.

Domestic crudes had helped to make up for the reduction in imported crudes, as refiners more than doubled their consumption of Shengli crude in September to 167,000 mt, and processed 8.2% more China Offshore crude at 1.15 million mt from August, the JLC data showed.

For Shandong-based independent refineries, the combined throughput comprised crude, bitumen blend and fuel oil.

JLC's survey covers 43 independent refineries in Shandong, with a combined capacity of 166.7 million mt/year, which accounts for about 18% of China's total refining capacity.

Feedstock inventories at major ports in Shandong rose 11.6% on the month to 7.57 million mt as of Sept. 30 amid a recovery in crude imports, the JLC data showed.

Shandong independent refineries' crude feedstock ('000 mt)

Sep-21
Sep-20
change
Aug-21
change
Imported crudes
7,114
9,120
-22.0%
7,270
-2.1%
Shengli
167
83
101.2%
77
116.9%
Offshore China
1,145
685
67.2%
1,058
8.2%
Total
8,426
9,888
-14.8%
8,405
0.2%
Total ( b/d)
2,059
2,416
-14.8%
1,987
3.6%
Jan-Sep 2021
Jan-Sep 2020
change
Merey
0
1,320
-100.00%
Other imported crudes
74,627
58,338
27.9%
Shengli
1,049
652
60.9%
Offshore China
8,914
6,370
39.9%
Total crude
84,590
66,680
26.9%
Total crude (b/d)
2,271
1,784
27.3%

Independent refineries' oil product output, sales, stocks ('000 mt)

Sep-21
Sep-20
change
Aug-21
change
Output
7,454
7,931
-6.0%
7,285
2.3%
Sales
8,022
8,035
-0.2%
7,163
12.0%
Stocks
965
1,174
-17.8%
1,533
-37.1%
Jan-Sep 2021
Jan-Sep 2020
change
Output
69,499
68,740
1.1%
Sales
69,573
68,532
1.5%

Top imported crudes cracked by Shandong independent refineries ('000 mt)

Sep-21
Sep-20
% Change
Aug-21
% Change
ESPO
1,667
1,430
16.6%
1,660
0.4%
Johan Sverdrup
910
1,175
-22.6%
1,070
-15.0%
Oman
545
440
23.9%
750
-27.3%
Nemina
490
400
22.5%
345
42.0%
Upper Zakum
380
150
153.3%
520
-26.9%
Basrah
270
230
17.4%
320
-15.6%
Oguendjo
250
100
150.0%
170
47.1%
Tupi
220
1,205
-81.7%
375
-41.3%
Castilla
180
370
-51.4%
0
N/A
Mostarda
180
0
N/A
180
0.0%
Jan-Sep 2021
Jan-Sep 2020
% Change
ESPO
12,795
13,161
-2.78%
Johan Sverdrup
7,705
5,840
31.9%
Tupi
6,695
11,613
-42.3%
Oman
5,775
4,580
26.1%
Upper Zakum
5,020
1,040
382.7%
Nemina
3,260
2,640
23.5%
Sokol
1,925
730
163.7%
Oguendjo
1,805
1,420
27.1%
Sapinhoa
1,770
330
436.4%
Castilla
1,760
2,905
-39.4%

Source: JLC