CHINA DATA: Sep crude throughput rebound unlikely to sustain

China’s crude throughput rebounded to a five-month high of 14.35 million b/d in September, National Bureau of Statistics data showed Oct. 18, but refining sources said the level is unlikely to sustain.

Oil product consumption picks up in September and October -- the peak demand season in China -- as fishing, harvesting and constructing activities progress, while the holiday travels gain pace amid the Mid-Autumn Festival and the Golden Week.

As expected, China lifted crude throughput by 2% from the 21-month low of 13.97 million b/d in August on a barrel-per-day basis to the highest since 14.36 million b/d in April, NBS data showed.

However, Chinese refineries are more likely to cut crude runs in October as more maintenance kicks in. Meanwhile, oil product demand is weaker than expected, as Beijing's stimulus measures are unlikely to prop up consumption immediately, refining and trading sources said Oct. 18.

In October, the primary capacity under maintenance was scheduled to double month on month to 960,000 b/d, while PetroChina's Dalian Petrochemical has permanently shut a crude distillation unit with 90,000 b/d capacity, alongside 12 related facilities. The reduction in operating capacity outpaced the 400,000 b/d brought online by the greenfield Yulong Petrochemical late last month. Yulong ran at about 60%-70% in the start phase.

Moreover, China's biggest refinery, Zhejiang Petroleum and Chemical with 800,000 b/d capacity, lowered its CDUs operation rate by around 15% due to weak margins. Market sources said oil products demand was weakening, as gasoline led the fall since the Golden Week ended on Oct. 8 with prices slump.

Weak outlook

Chinese government released a flurry of stimulus in late September to boost the economy in order to meet its annual GDP growth target.

Industrial sources and analysts said they do not expect measures released in October by different ministries to immediately increase oil demand.

"Property market is significant for products consumption, especially for gasoil. But the new property policy released yesterday is too modest, aiming at destocking the existing housing supplies. It is too early to see the hope of resume new home construction, a drag on gasoil demand," a Beijing-based analyst said.

In addition, NBS on Oct. 18 reported that China's GDP expanded 4.8% year on year in the first three quarters of the year.

"The beat in the third-quarter numbers keeps China within striking distance to hit its full-year growth target of 'around 5%' this year and requires a slightly less impressive Q4 growth rate than what was previously expected," said Lynn Song, chief economist of Greater China with an investment bank ING.

Therefore, S&P Global Commodity Insights anticipated China’s crude runs to drop 253,000 b/d in 2024 from a year ago, contrasting with a hefty year-on-year increase of 1.2 million b/d seen in 2023, according to its monthly report dated Sept. 30.

Analysts with Commodity Insights expect China's annual oil demand growth to decline to 202,000 b/d in 2024, from 1.4 million b/d in 2023, owing to economic growth slowdown, accelerated transportation fuel substitutions and improved efficiency, impacting gasoline and gasoil demand, the report showed.

According to NBS data, China processed 14.21 million b/d of crude in January-September, down 2% year on year.

Upstream output firms

However, China’s crude production rose 1.6% year on year to 4.28 million b/d in January-September, aided by increased upstream investment.

This came despite crude output falling 1.1% from August to a nine-month low of 4.17 million b/d in September as typhoons hampered production.

Typhoon Bebinca and Super Typhoon Yagi, which landed in mid-September, affected China's offshore crude production, despite CNOOC saying it "remotely controlled [operations] during typhoons, to maintain the production of the oilfields and reduce production losses".

Offshore oil fields contributed 70%-80% of China's domestic crude production growth in recent years.

PetroChina's Liaohe oilfield in northeast China gradually resumed usual productions in September after the floods, but the output increase was significantly below the reduction in South China Sea, upstream sources said.

Commodity Insights forecast China’s crude production to continue its growth trend in 2024, expanding 91,000 b/d from 2023. This comes as the central government underscores the significance of energy security.

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

China's crude output, throughput (million mt)