China Petroleum & Chemical Corporation, or Sinopec, is expected to reduce refinery run rates by up to 10 percent at some of its facilities amid renewed travel restrictions in China to fight a COVID wave, a commodity research analyst told Bloomberg in an interview on Tuesday.
According to Jean Zou, an analyst at Shanghai-based commodities researcher ICIS-China, Sinopec is likely to reduce run rates at some refineries by between 5 percent and 10 percent in August, compared to previous plans for this month’s throughput.
China imposed in the past two weeks widespread restrictions on travel in major cities, including Beijing, to contain a resurgence in COVID cases of the Delta variant. As with the previous outbreak, which China stifled with a complete lockdown, the rise in infections is affecting movement and, consequently, fuel use.
China is also testing tens of millions of people and is suspending airline and long-haul bus trips from cities with reported COVID cases in an attempt to eradicate early the Delta variant outbreak in the country. The capital Beijing is also tightening travel restrictions, adding to the already growing concerns about fuel demand in the top oil importer in the world.
The localized lockdowns are expected to reduce fuel demand in the country, which has already slumped with the new COVID wave, Chinese consultancy JLC said on Friday.
In another evidence of the impact of the virus on fuel demand, traffic congestion in Beijing declined by 30 percent last week and is falling in other parts of the country as well, Bloomberg has estimated.
Jet fuel demand will also suffer as the authorities suspend flights to stem the spread of the new coronavirus variant. Some bus, taxi, and ride-hailing services are also being suspended in some Chinese regions, adding to the negative effect on demand.
Fears that Chinese oil demand will slow have been weighing on oil prices since the start of August.
By Tsvetana Paraskova for Oilprice.com
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