One of the world's top commodity traders, Trafigura, expects the Asia Pacific region to have a deficit of refined oil products by 2025, despite the current fuel glut and despite the new refining capacity in China coming online over the next few years.
"Asia Pacific remains in need to import oil products in order to meet its growing demand in 2025 as the region is short of new refining capacity," Trafigura's chief executive Jeremy Weir said at the International Petroleum and Natural Gas 2019 conference in Zhoushan, China, as carried by S&P Global Platts.
Despite weaker refining margins and a glut of refined oil products, demand for crude in China continues to grow, also thanks to Hengli Petrochemical, which had a new refinery start up earlier this year and ramped up to full 400,000-bpd capacity at the end of May. Another 400,000-bpd refinery, of Zhejiang Petrochemical, began trial runs, further pushing demand for crude.
The current glut of refined products in China will likely peak at around 5 million bpd in 2022, according to Trafigura's Weir. The market in the region excluding China, on the other hand, is expected to have a deficit of oil products of some 6 million bpd in 2025, Weir said in a presentation.
China's oil product exports surged last month as its crude oil imports rose by 11 percent on the year to top 10 million bpd for the first time since April. Oil product exports from China rose 39.6 percent, while oil product imports fell by 26.5 percent from August.
Chinese refiners are already producing more fuels than the domestic market needs and the resulting surge in exports is depressing refiners' margins both at home and in neighboring countries. Nevertheless, refiners have chosen to make the best of their import quotas and produce all the fuels they can under them.
Earlier this year, China issued a new batch of oil product export quotas and they are 5.3 percent higher than they were this time last year.
By Tsvetana Paraskova for Oilprice.com
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Comments
The proof is that China’s crude oil imports have been rising by 11% on the year to top 10 million barrels a day (mbd) buoyed by an economy growing at a healthy 6% this year and a 39.6% rise in China’s oil product exports.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London