Market Chatter: China State Refiners Cut Throughput Amid Supply Disruptions, Weak Margins
Chinese state-run oil refiners have significantly scaled back operations, cutting crude processing by over 1 million barrels per day since the outbreak of the Middle East conflict, Reuters reported on Tuesday, citing industry sources.The drop comes as supply disruptions and collapsing margins force the world's largest energy importer to pull back.The reduction by energy firms Sinopec, PetroChina, CNOOC, and Sinochem, which together control about 60% of China's refining capacity, has weakened crude demand from the world's top importer, the report said.It also threatens to tighten domestic fuel supplies ahead of peak summer driving season.State refiners are processing 8.4 million b/d this month, down from 8.6 million b/d in April and 9.5 million b/d in March. Prior to the escalation of the conflict in late February, throughput hovered about 10 million b/d.The Chinese refiners' throughput is projected to ease further to 8.35 million b/d in May, compared with 8.61 million in April and 10.17 million b/d before the conflict began, the report said, citing data from local research firms.China's State Council Information Office did not respond immediately to' request for comments.The refiners, which are heavily reliant on Middle Eastern crude supplies, started trimming operating rates in March. Independent processors in Shandong province, China's refining hub, only began cutting runs this month as margins deteriorated.Margins for state refiners plummeted to about 3,200 Chinese Yuan ($470.17) per metric ton in late April. Though losses have since narrowed to about 300 Chinese yuan per mt, processors remain cautious.Sinopec has adjusted its operational calendar in response to the crunch. The state giant advanced scheduled maintenance at its Yangzi and Hainan petrochemical plants, which have a combined capacity of over 400,000 b/d, to May and July, bringing them forward from Q4.Sinopec is also pushing back against high official selling prices from Gulf producers. The energy firm reduced its crude loadings from Saudi Arabia in May and doesn't plan to lift any Saudi cargo in June.(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)