CHINA DATA: H1 crude runs slip 6% as lockdown erodes GDP growth, fuel demand

China saw its crude throughput decline 6% year on year in the first half of the year when widespread lockdowns to battle a new wave of COVID-19 took a toll on oil demand, industrial activity and the economy, pulling down GDP growth to as low as 2.5% in the same period, data from the National Bureau of Statistics showed July 15.

The country's Q2 GDP growth stayed in the positive territory, at 0.4%, as the government stepped up efforts to stimulate the economy in June to meet the 5.5% annual growth target after the lockdowns.

Industrial production, on the other hand, grew 3.9% year on year, compared with a slight rise of 0.7% in May and a 2.9% reduction in April, NBS data showed.

This supported crude runs to stage a month-on-month recovery in June but was not enough to overshadow the negative growth trend seen in previous months. Cumulative crude runs in January-June stood at 13.45 million b/d, or 332.22 million mt.

In June, China's crude throughput rose to 54.94 million mt, a growth of 1.9% from May, when it had rebounded by 4.1% from the 35-month low of 51.81 million mt in April, NBS data showed. But on a year-on-year basis, June throughput represented a 9.7% fall.

In barrels per day, throughput in June stood at 13.42 million b/d, rising 5.3% from May levels. The volume was close to Platts Analytics' estimate of 13.38 million b/d for June, according to its monthly report dated July 7.

S&P Global data showed China's four state-owned refiners lifted their average utilization rate to 75% in June from a two-year low of 73.4% in May.

Meanwhile, independent refineries in Shandong lifted their throughput by 15.4% month on month to 1.93 million b/d in June, despite the Liaoning-based Hengli Petrochemical (Dalian) and Zhejiang-based Zhejiang Petroleum & Chemical reducing their combined crude runs by 3% to 835,620 b/d from May, data from local information provider JLC showed.

Q3 throughput to rise

Looking forward to July, China's crude throughput is set to see a further rise as the summer holiday season kicks off and families plan domestic trips during the vacation, which would support gasoline and jet fuel demand.

In addition, higher temperatures during the summer season are pushing up demand for air-conditioning, raising expectations that more gasoline and gasoil will be burned in the foreseeable future, refinery sources said.

A fall in domestic product prices is also expected to encourage oil product consumption, prompting refiners to ensure that they keep most of their units running in the month.

In the first week of July, the average utilization rate at Shandong's independent refineries recovered to around 68.9%, from 63.3% seen in the first week of June, according to the JLC.

But certain accidents and low oil product exports are expected to cap state-owned refineries' throughput.

Sinopec's Shanghai Petrochemical is unlikely to resume operation in July due to an accident in late June, while its peer Maoming Petrochemical would keep runs low due to a fire at its chemical division in early June.

Chinese refineries are also likely to keep oil product exports at multi-year-low levels as Beijing is keen to ensure sufficient domestic supplies, limiting throughput hikes, analysts said.

Platts Analytics expects China's crude throughput in July to rise about 3% from June, but fall 3% year on year. As the peak consumption season approaches in autumn, throughput volume in Q3 is expected to increase 2% year on year and gain 9% from Q2 levels.

Upstream outlook

In the upstream sector, China lifted its crude production by 3.6% year on year to 17.19 million mt, or 4.2 million b/d, in June, a 6.5-year high. The previous high was 4.3 million b/d seen in December 2015, NBS data showed.

This lifted the volume in the first six months by 4% year on year to 102.88 million mt, or 4.17 million b/d, as state-owned oil giants' stepped up efforts to produce more in their quest for national energy supply security at a time when prices are relatively high.

While PetroChina will rely on its Changqing, Tarim, Xinjiang and Southwest fields to sustain its production growth of 1.3% seen in 2021, the offshore Bohai field will continue to be CNOOC's flagship output source. CNOOC targets to lift its oil and gas output by 5.6% year on year to 1.64 million-1.67 million b/d of oil equivalent in 2022.

Sinopec also plans to boost its crude production, by 0.5% year on year to 770,000 b/d in 2022.

These developments will raise hopes that China could hit its target to produce 200 million mt, or 4.02 million b/d, of crude in 2022.

China's crude output, throughput:

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Source: National Bureau of Statistics