China's refineries cut April throughput, lift product exports amid weaker local demand
China's refineries are to slash throughput in April and lift oil product exports from initial plans to compensate for falling domestic demand due to COVID-19 lockdowns, refiners told S&P Global Commodity Insight on April 8.
The country's financial center, Shanghai, a city of 25 million people, has gone into lockdown due to omicron variant outbreaks and there have been reports the lockdown could be extended into May. Other cities in northeast, east and south China also stay in alert mode.
The latest lockdown has compounded China's supply chain and logistical challenges; transportation has been disrupted, workers are in isolation, and construction work has been wound down or stopped altogether.
This situation is likely to continue while the Chinese government adheres to a zero-COVID policy.
As a result, 10 refiners from the 11 polled Sinopec and PetroChina refining sources said they have cut their April throughput by 30,000-100,000 mt from their initial planned volume or are going to reduce.
These include Sinopec's 14 million mt/year Shanghai Petrochemical, which has been locked down since late March. It is to lower throughput by 40,000 mt to 1.19 million mt in April.
"Shanghai's demand for oil products is drying out, product inventory is rising," a source with the plant said.
The neighboring 8 million mt/year Anqing Petrochemical plant has trimmed throughput several times since April 1 to get the current target of about 550,000 mt from an initial 650,000 mt.
Another neighbor, the 16 million mt/year private greenfield Shenghong Petrochemical has further delayed its startup, with no fixed commission schedule, given high oil prices coupled with weak product demand, according to a company source.
Down south in Guangzhou, oil product sales are also slow, despite the capital city of Guangdong being less affected by the latest wave of the pandemic. The 13.2 million mt/year Sinopec plant has cut throughput by 40,000 mt from planned to 990,000 mt in April, a refining source said.
In eastern China's Shandong province, independent refineries have even chopped their average utilization rate to 49.4% as of April 6, against 57.1% a month earlier as of March 9, according to local information provider JLC.
In northeast China, three of PetroChina's refineries in Liaoning province have reduced their April throughput by 30,000-50,000 mt from original plans, according to sources with the plants. The neighboring Jilin province is another epicenter of the current wave of COVID-19 spreading.
Analysts in Beijing warned that refineries may further lower throughput when demand is worsen.
In addition to throughput, PetroChina's refineries have also lifted product exports from initial estimations.
But the increase is likely to be capped due to limited export quotas and logistical restriction due to COVID-19 controls, analysts said.
One Dalian-based PetroChina refinery is to increase its gasoline exports in April from the initial plan of 32,000 mt to 130,000 mt, while the other PetroChina refineries in the same city will export 150,000 mt of gasoline this month -- compared with zero in its original plan, according to company sources.
Moreover, PetroChina's Guangxi Petrochemical is also likely to ship out some gasoline barrels.
PetroChina was initially estimated to export only 32,000 mt of gasoline in April.
"But lockdowns and movement controls ban driving activities, even during the Tomb-Sweeping Day holiday (April 3-5)," a company source said.
"Oil products stock is rising, forcing refiners to upward adjust their export plans, especially gasoline," said a product trader in East China.
However, Beijing slumped oil product quota awards by 55.9% year on year in the first-round allocation for 2022, at only 13 million mt, which caps exports in the month.
Market sources had initially estimated China to export 416,000 mt of gasoline and 140,000 mt of gasoil in April, S&P Global reported.
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