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China to draw down crude inventories on rebound in October oil processing amid weak imports

November 17/2021

MOSCOW (MRC) -- A rebound in China's crude oil processing in October coupled with a sharp drop in imports of the fuel means the world's biggest crude buyer is back to drawing down inventories, reported Reuters.

China's refineries used 58.4 MM tons of crude in October, equivalent to about 13.75 MMbpd, up from the 16-month low of 13.64 MMbpd in September.

But the total volume of crude available to refineries from both imports and domestic output was just 54.63 MM tons, or about 12.86 MMbpd.

This means that refineries processed about 890,000 bpd more crude than what was available from imports and domestic production, meaning that they had to draw down on inventories.

China doesn't disclose the volumes of crude flowing into or out of strategic and commercial stockpiles. But an estimate can be made by deducting the total amount of crude available from imports and domestic output from the amount of crude processed.

In the past seven mos, China's refineries have processed more crude than what was available on five occasions.

However, strong stockpile builds in the first quarter of the 2021 mean that for the first 10 mos overall, China has added about 150,000 bpd to its commercial or strategic storages.

But even this modest build is well below what has been the pattern of the last several years, as China has consistently imported crude well beyond its consumption as it built up its strategic petroleum reserve (SPR). For example, in 2020, China's imports and domestic output combined were some 1.26 MMbpd more than refinery throughput.

China's appetite for crude oil imports has been a major driver of demand growth for the fuel in recent years, but it's likely that 2021 will see that dynamic come to a halt.

Imports for the first 10 mos of the year were 10.21 MMbpd, down 7.2% on the same period in 2020, according to official customs data. October imports were just 8.9 MMbpd, the lowest since September 2018.

There are several factors behind the weakness in imports, with some of them being transitory, such as a lack of import quotas for independent refiners and a wider power shortage that led to energy-intensive industries, such as oil refining, scaling back output in order to conserve electricity.

China's crude imports are likely to stage a recovery in November and December as refiners work to ensure adequate fuel supplies for the northern winter.

As MRC wrote previously, China's crude throughput rose 0.8% to 13.81 million b/d in October from a 17-month low in September.

We remind that the average utilisation rate at China's four state-owned refiners fell to a five-month low of 80.6% in October from 81.5% in September while independent refiners also maintained run rates at low levels due to feedstock shortage. These would likely lead the country's crude throughputs to extend the downward trend in October from the 17-month low of 13.7 million b/d, or 56.07 million mt, in September, according to data from the National Bureau of Statistics.

The four state oil companies -- Sinopec, PetroChina, CNOOC and Sinochem - plan to process a total 7.67 million b/d of crudes in October, against their nameplate capacity of 9.52 million b/d, Platts data showed. This compared with a planned throughput of 7.7 million b/d in September. In November, the state-run refiners plan to lift throughput from the low base in October to boost gasoil and gasoline supplies for meeting domestic demand, refining sources said.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,868,160 tonnes in the first nine months of 2021, up by 18% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,138,510 tonnes in January-September 2021, up by 30% year on year. Supply of propylene homopolymer (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding statistical copolymers of propylene (PP random copolymers) decreased significantly.
Author:Margaret Volkova
Tags:crude and gaz condensate, propylene, ethylene, petrochemistry, CNOOC, PetroChina, Sinochem, Sinopec, China.
Category:General News
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