China Reduces Imports of Crude Oil in Q3 2017

Jul 18th, 2017

Leading Chinese refineries reduce production for the summer period. Specifically, in the third quarter, 10% of the national production capacity will be closed.
This is primarily due to the growth of electricity consumption plus a large number of accumulated petroleum products. China is the leading importer of crude oil, but currently, there is a decrease in demand from Chinese refiners because the domestic market cannot take full advantage of the offered volume of diesel fuel and gasoline.

PetroChina and Sinopec, leading Chinese refineries, reduce production on average by 5% – 230 thousand barrels per day – from the performance in 2016. Fushun, which is owned by PetroChina, has closed for 45 days. Sinopec reduces the volume of average daily productivity for only the second time in 16 years.
In addition to the two giants, 4 public and 6 private companies in China will be closed for routine maintenance that will reduce refining capacity by 1.3 million barrels a day.

In total, the production will decrease by 15 million barrels per day, which is 10%. According to experts, to combat the surplus of petrochemicals, China will export petroleum products to the world markets. Most of the export will go to the Asian markets.

Suppliers from Africa and Europe have already felt the decline in demand from China. Angola, which exports the largest part of its oil to China, reports about the reduction of deliveries to the minimum. This month, China consumed 2 million barrels of oil. This is negligible compared to 10 million barrels in May and 6 million in June. The situation at the Chinese market puts pressure on global oil prices, although traders believe that Chinese refiners will resume interest in oil imports after they deal with the accumulated surplus of petroleum products.

Traders can save their profits by reselling the oil reserves that are stored in South Korea and China and in tankers off the coast of Malaysia. Some traders hope for growth in demand in the 4th quarter as it was last year when Chinese refiners quickly began to expend the allocated quota on import to get a new one. Despite a certain unpredictability of China, the world oil suppliers hope for the renewal of the import activity from Chinese refineries.