CHINA DATA: H1 crude oil throughput jumps 10% on year amid 5.5% GDP growth

China's crude oil throughput jumped 9.9% from a year ago to 14.72 million b/d in the first half of 2023, stronger than its GDP growth of 5.5% in the same period, National Bureau of Statistics data showed July 17.

To boost the economic growth, which has been slower than expected, Chinese refineries may be required to further increase throughput in H2 to lift oil product exports in addition to meeting domestic demand, analysts said.

The country's GDP growth stood at 6.3% in the second quarter, the NBS data showed, lower than the market estimate of 7.3% despite a low base over April-June 2022 amid countrywide COVID-19 lockdowns.

"China's widely anticipated reopening has so far failed to extend beyond travel and services, with its economic recovery losing steam after the bounce earlier in the year," IEA said on its report released July 13.

Beijing in March set a goal of around 5% growth for 2023. S&P Global Commodity Insights on July 11 projected China's real GDP growth at 5.5% in 2023 and to slow to 5.0% in 2024.

"The Chinese government has stepped up monetary easing in response to a weakened economic recovery. Additional stimulus measures will likely follow. However, the scale of the new stimulus will likely be limited, partly owing to China's high debt level. The new stimulus will likely stabilize faltering growth momentum but will not induce a robust recovery, given the deep scarring of the private business sector and households," S&P Global said.

"With underlying growth momentum in bad shape, there is a growing hope for "big bang" stimulus to fire up China's growth," said Vishnu Varathan, head of Economics and Strategy at Mizuho. He added that China's economic prospects are now acutely tied to stimulus aid.

H2 throughput to cross over 15 mil b/d

China's crude oil throughput is set to rise further in the rest of the year compared to H1 to meet domestic demand growth with the simulators, even if they will be modest ones, market analysts said.

"We estimate crude throughput to rise about 400,000 b/d from H1 to average above 15 million b/d in H2, considering fewer maintenance shutdowns and the typical demand peak season for gasoil in September and October," a Beijing-based analyst said. Autumn is the harvest season for agriculture, fishing, and constructions.

He added a possible support for gasoil demand from a growth in manufacturing goods exports amid softening China-US tension, consumption increases in gasoline and jet fuel during summer holiday in July-August, as well as the National Day holiday in October.

China's industrial production rose 3.8% year on year in H1 compared to 3.4% in the same period of 2022 amid lockdowns.

"Don't forget, higher throughput is also a tool to boost the indicators of industrial activity, thus economic indicators, while the oil product surplus can be exported," a second Beijing-based analyst said.

New capacity lifts throughput

In H1, the strong year-on-year growth was driven primarily by the post-reopening recovery and the commissioning of 320,000 b/d Shenghong Petrochemical in late 2022, as well as PetroChina's 400,000 b/d Guangdong Petrochemical in early 2023, according to Yao, a senior analyst with S&P Global.

But "the strong year-on-year growth came from the bounce back effect due to the low basis in Q2 2022 is unlikely to repeat in H2," Yao added.

Crude throughput in June was also seen a 10.2% year-on-year increase to 14.89 million b/d. As S&P Global expected, it rose 1.6% from the three-month low in May with fewer refineries undergoing maintenance and others lifting utilization rates amid high crude imports in the month.

The NBS releases data in metric tons, which S&P Global converts to barrels using a conversion factor of 7.33.

In metric tons, the June throughput fell 1.7% to 60.95 million mt from May.

The country's crude oil production was buoyed at a high 4.28 million b/d, or 18.07 million mt, in June, almost flat from 4.27 million b/d in May, the NBS data showed.

The volume represented a 1.9% year-on-year increase.

Yao attributed a steady crude output growth in H1 largely to continuous emphasis from central leadership on energy security and strong production commitments from the country's three national oil companies – PetroChina, CNOOC and Sinopec, which is expected to be maintained for the rest of the year.

In the first six months of this year, China's crude oil output gained 2.1% year on year at 4.25 million b/d, NBS data showed. This significant growth was mainly concentrated in oil blocks in Xinjiang region and Bohai Bay, according to Yao.

China's crude oil output, throughput (million mt)

Source: National Bureau of Statistics