China’s refiners are expected to lower their refinery runs at the biggest scale—by 900,000 barrels per day (bpd)—since the beginning of the pandemic in 2020, as new COVID-related lockdowns weigh on fuel consumption, analysts and industry sources told Reuters on Thursday.
China’s demand, especially gasoline demand, has suffered in recent weeks as authorities continue with their “zero COVID” policy and lockdown large cities and areas to contain a surge in infections. Most recently, China locked down 26 million residents in the financial hub Shanghai, which hit demand as people are confined to their homes.
The return of severe lockdowns as China is battling its worst coronavirus outbreak in two years has prompted analysts to lower expectations of oil demand in the world’s top oil importer and, by extension, global oil demand for this quarter and the full year 2022.
Refiners in China are now set to reduce runs this month by nearly 1 million bpd, which would be equivalent to 6.3 percent of the average Chinese refinery production in recent months, according to Reuters calculations.
Moreover, independent refiners in the Shandong province have seen their run rates slip further on maintenance, China’s commodity consultants JLC said on Wednesday.
Lower refinery throughput in China raises concerns about the immediate oil demand in the world’s top crude oil importer and weighs on oil prices.
Earlier this week, both OPEC and the International Energy Agency (IEA) cited weakened Chinese demand as a key factor—alongside the Russian war in Ukraine—in their reduced forecasts of global oil demand.
Oil demand is expected to average 99.4 million bpd this year, the IEA said on Wednesday, cutting its 2022 demand outlook by 260,000 bpd to reflect the return of severe lockdowns in China. On Tuesday, OPEC also slashed its oil demand growth estimate for 2022 by nearly 500,000 bpd on the back of lower expected global economic growth with the Russian war in Ukraine and the return of COVID lockdowns in China.
By Tsvetana Paraskova for Oilprice.com
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