MOSCOW (MRC) -- China is set to boost its gasoline and gasoil exports from August as state-run refiners actively seek to clear the country's surging oil product stockpiles with heavy rains and floods significantly denting domestic consumer and industrial fuel demand, said S&P Global.
Since June, 23 provinces and Chongqing municipality have been suffering from heavy rains and floods. During the period, the region along the Yangtze river recorded the highest accumulative rainfall since 1961 at 410.4 mm, according to China Meteorological Administration.
As a result, the regions' transportation, construction and broader industrial activities came to a grinding halt, putting the brakes on the domestic fuel demand recovery since the peak of COVID-19 pandemic during February-April.
Despite the set back in domestic fuel demand, Chinese refineries have been maintaining high run rates in order to digest record-high crude imports, prompting oil product inventory to surge. An official from a Sinopec refinery in Wuhan said its oil product storage tanks were all full despite the plant's throughput cut to about 80% since July 14 from over 100% previously.
Wuhan is one of the major cities located in the middle-stream of Yangtze river that suffered from floods. China's crude throughput reached an all-time high of 14.14 million b/d in June, up 9% year on year, data from National Bureau of Statistics showed.
The country's crude throughput is expected to remain high in July as there are still a large number of crude oil cargoes to be discharged. More than combined total of 80 million barrels of tankers are still waiting in Chinese waters for more than 15 days because of the ongoing port congestion, data intelligence firm Kpler showed on July 21.
The surge in fuel inventories has put a lot of pressure on China's major fuel exporters to actively seek overseas outlets to clear their excess supplies at home. As almost all the state-owned refineries along the Yangtze river are managed by Sinopec, it is necessary for the refining giant to manage the domestic demand-supply balance and lead the exports, industry and trading sources said.
"We have proposed an increase in product exports next month to the head office in order to offset product inventory pressure," said an official at a Sinopec refinery in Shanghai.
As MRC informed before, global oil consumption cut by up to a third in Q1 2020. What happens next in the oil market depends on how quickly and completely the global economy emerges from lockdown, and whether the recessionary hit lingers through the rest of this year and into 2021.
Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.
We remind that in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
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