Black China Blog

This article comes from Bloomberg.   Reduced processing rates could put upward pressure on coke prices.

China’s crude oil demand growth may continue to slow in the third quarter as a cooling economy cuts requirements for fuel including diesel, according to data from the country’s largest oil company.

Crude consumption may average 37 million metric tons a month, or about 8.9 million barrels a day, up 9.5 percent from a year earlier, China National Petroleum Corp.’s research unit said in an e-mailed report. That compares with the 15 percent gain in the second quarter and the 22 percent increase in the first, Bloomberg calculations derived from official figures show.

The economy is cooling as the government trims credit growth, presses for energy efficiency gains and discourages multiple-home purchases. Diesel sales at China’s two biggest oil companies including China Petrochemical Corp. dropped “noticeably” last month from June, CNPC said in a statement.

CNPC and China Petrochemical, known as Sinopec Group, aren’t planning to import diesel in August, according to the statement posted on its website today.

Heavy rains, floods and an annual fishing ban from June to August for conservation reasons have also curbed diesel use, CNPC said. Privately held refineries may keep operating rates at about 33 percent in August because of weak sales, it said.

Growth in China’s diesel consumption in the third quarter may slow to 5.5 percent with monthly demand averaging 13.2 million tons, CNPC said.

Gasoline demand in the quarter will remain “relatively high” at about 6 million tons a month on average, up 7 percent from a year earlier. Kerosene use may gain 2.4 percent to 1.45 million tons a month.

China Petroleum & Chemical Corp., a unit of Sinopec Group that supplies 60 percent of the country’s fuel, fell 1.6 percent in Hong Kong trading as of 2:41 p.m. local time, lagging behind the 0.6 percent gain in the benchmark Hang Seng Index. PetroChina Co., a unit of CNPC, climbed 0.4 percent.

The country’s gasoline exports may have dropped to 300,000 tons in July from 402,000 tons in June because of domestic summer demand, CNPC said. The oil spill in Dalian last month also cut gasoline exports from PetroChina’s refineries, according to CNPC.

The country’s diesel exports may have risen to as much as 400,000 tons from 270,000 tons in June, it said.

China’s oil-product output may decline about 0.5 percent in August from last month as CNPC and Sinopec Group shut processing units at plants in Yangzi, Lanzhou, Jinxi, Daqing and Yumen for maintenance, CNPC said.

PetroChina may start operating its Qinzhou refinery in Guangxi province at the end of August or in early September, CNPC said. The plant’s operating rate won’t be high initially, according to the statement.

China’s June crude-oil processing rose at the most gradual pace in eight months as the world’s fastest-expanding economy slowed. Economic growth eased to 10.3 percent in the second quarter from 11.9 percent in the first.

The following story appeared in today’s China Daily.

China’s leading refineries will raise their crude processing mildly in November to a record high as signs of recovering demand are piling up while a widely-expected fuel price hike nears.

Twelve major plants accounting for more than a third of China’s capacity, most of them on the country’s eastern and southern seaboards, plans to process 2.70 million barrels per day of crude oil in November, 1.1 percent higher than October, a Reuters poll showed.

The volume would represent around 90 percent of their total refining capacity.

Fujian Refining & Petrochemical Co Ltd, a joint venture between Sinopec Corp, Exxon Mobil and Saudi Aramco, is expected to continue to rev up operations this month. It will hold a formal launching ceremony next week.

Crude throughput at PetroChina’s Jinxi will tilt up after a sharp increase of more than 60 percent in October, but the level would still be far below its capacity due to insufficient complementary downstream facilities.

Senior Sinopec officials have said the top refiner in Asia suffered a refining loss in October but sales were expected to improve continuously. One of the officials forecast a profitable fourth quarter because of confidence in China’s fuel pricing scheme that guarantees a profit margin if oil prices are below $80 a barrel.

Analysts said last week that China may raise retail fuel prices by 5-6 percent after benchmark crude prices rose more than 6 percent since Beijing’s last price move in September.

The moving average of international crude oil prices, on which China’s fuel prices are based, climbed further this week.

“An increase was certain, but the timing was uncertain and the government would not explain,” one Shanghai-based oil analyst said.

China’s apparent oil demand rose 12.5 percent in September from a year earlier, the sixth rise in a row and the fastest rate since June 2006, Reuters calculation showed.

China’s energy authorities also forecast a double-digit growth rate of apparent demand for refined oil products, mainly gasoline, diesel and kerosene, in the fourth quarter on the back of an improving economy.

Fuel stocks held by Sinopec Group and CNPC, which operate a majority of their businesses via listed Sinopec Corp and PetroChina respectively, fell for the second month in a row in September, despite record crude throughput, partly indicating healthier fuel demand.