IMG.gif

Asia: Pandemic Hits China Again, Refineries Lower Crude Runs

Copyright © 2021 Energy Intelligence Group
China The New Price Stabilizer

A new series of lockdowns has hampered oil products demand in China as the coronavirus stages a new outbreak. Some refineries have been forced to cut runs, which is also expected to trim Chinese product supplies. Newly curbed Chinese oil product export quotas will likely limit how much excess Chinese gasoil, gasoline and jet fuel make their way into the wider Asia-Pacific markets and beyond (OMI Jul.19'21). Further, the lockdowns have caused airlines to slash domestic flights, causing prompt demand for jet to tumble. Scheduled airline capacity in China for the week of Aug. 9 plummeted by 31.9% from the previous week, according to aviation data analysis firm OAG. China’s commerce ministry issued new export quotas for 7.5 million metric tons of gasoline, diesel and jet fuel. They were allocated to seven major oil companies, including privately owned Zhejiang Petrochemical. This was the second batch of export quotas for refined products for this year, and it came in much lower than the first batch that had totaled 29.5 million tons. So far this year China has now issued export quotas totaling 37 million tons of gasoline, diesel and jet fuel, which is down by about one-third compared with the same period last year. The ministry awards each company an overall quota for its exports but lets the companies decide how to divvy up their quotas between gasoline, diesel and jet fuel. Beijing has also issued a second batch of low-sulfur fuel oil export quotas to the country's three large state-run oil majors amounting to 3 million tons. That brings the total for the year so far to 8 million tons. Some independent refiners are also close to running out of crude import quotas, and this, coupled with the slashed product export quotas and the slump in demand from lockdowns, is forcing some refiners to cut runs (OMI Jun.16'21). This is likely to trim Chinese domestic product supply, although the outlook is uncertain and dependent on whether China manages to stop the Covid-19 outbreak. There is talk that China’s largest refiner Sinopec is planning to cut runs by 5%-10%, with a Chinese refinery source believing that PetroChina might follow suit. Slumping demand is also prompting some independent refiners to consider suspending operations. A market analyst estimates that overall Chinese refining runs might be cut back by 5%. That is the equivalent of at least 700,000 barrels per day of crude throughput and will affect crude imports for China and global crude balances. The 800,000 b/d Zhejiang Petrochemical refinery, commonly known as the Rongsheng plant after its majority shareholder, has been running only two of its four 200,000 b/d crude distillation units (CDUs) since the facility has practically run out of crude import quotas. The two CDUs are believed to be running at around 70%-90% of their capacities, meaning that the biggest refinery in China is operating at less than half its total capacity. This has hobbled the ramp-up of the 400,000 b/d second phase, which comprises half the refinery, and limited how much products Rongsheng has been able to supply. Rongsheng has since received a third round of crude import quotas, which would help boost runs going forward. But the volumes would not be enough for the second phase to ramp up properly, one analyst said. PRICES Monthly Prices Recent Week Prices Aug 2- Aug 9- May Jun Jul Aug 6 Aug 13 SINGAPORE ($/bbl) Naphtha 65.63 70.12 74.77 73.66 72.59 Premium Gasoline 76.08 80.22 85.22 83.68 82.53 Jet Kerosene 71.60 75.85 77.12 75.90 74.03 0.5% Gasoil 71.68 76.36 77.52 76.02 74.01 ($/metric ton) 0.5% Fuel Oil (VLSFO) 495.14 529.55 543.64 532.40 521.60 3.5% Fuel Oil (180 cst) 379.04 410.73 420.21 419.01 408.35 f.o.b. cargoes. JAPAN (Delivered) ($/metric ton) Naphtha 609.13 650.00 691.37 681.40 671.69 ($/bbl) Jet Kerosene 73.72 77.75 78.95 77.80 75.78 0.2% Gasoil 74.69 79.32 80.34 78.92 76.79 MIDEAST (Gulf) ($/bbl) Naphtha 68.03 72.55 77.29 76.09 75.12 Premium Gasoline 78.48 82.65 87.74 86.11 85.06 Jet Kerosene 71.79 75.88 76.20 75.31 73.21 0.5% Gasoil 72.68 77.34 77.45 76.29 74.07 Fuel Oil: ($/metric ton) 0.5% Fuel Oil (VLSFO) 492.81 525.64 536.55 532.20 518.00 3.5% Fuel Oil (180 cst) 371.49 403.10 412.45 410.75 401.55 f.o.b. cargoes. ARBITRAGE TRADE WINDOWS Gasoil to Singapore: ($/bbl) From Mideast -3.00 -2.77 -2.07 -2.57 -3.00 Fuel Oil to Singapore: From Mideast (380 cst.) -0.13 -0.10 -0.09 -0.11 -0.36 Positive values indicate the theoretical profit opportunity

Public pressure and high natural gas prices may not be enough to solve the methane waste problem plaguing the Permian Basin.
Fri, Sep 17, 2021
Most Read
BP has agreed to work with Abu Dhabi's national oil company and the emirate's renewable energy company on a series of energy transition initiatives
Thu, Sep 16, 2021