China Petroleum & Chemical Corporation, or Sinopec-the largest oil refiner in Asia-is cutting its refinery production by 600,000 bpd in February, due to decreased fuel demand amid the raging coronavirus outbreak, four sources familiar with the plans told Reuters on Monday.
The spread of the coronavirus and its impact on fuel demand amid travel restrictions and thousands of canceled flights has already had analysts saying that refiners in China and throughout Asia would resort to reducing refinery runs because of depressed demand.
China's independent refiners were expected to cut refinery throughput more significantly because they are not allowed to export fuels, unlike the state-held corporations.
Independent refiners in China's Shandong province in the east have already cut refinery runs by as much as 30-50 percent and are now said to operate at less than half of their refining capacity, according to Reuters' sources.
Sinopec, for its part, is cutting 600,000 bpd of fuel production this month alone, which represents 12 percent of the corporation's 5-million-bpd average fuel production for last year, Reuters sources say.
Sinopec told Reuters in a statement that it was carefully monitoring market demand and would optimize its run rates and fuel product mix based on that demand, avoiding to directly refer to refinery production reductions.
Analysts continue to struggle to peg the exact demand loss from the coronavirus, but they agree that there would be some demand destruction in China, in the first quarter at least.
Wood Mackenzie estimates that China's oil demand will be reduced by 250,000 bpd in the first quarter of 2020.
The sudden demand shock from the coronavirus will make OPEC and Russia's efforts to balance the market and support oil prices even more difficult.
The OPEC+ allies are said to be considering deepening the cuts by another 500,000 bpd, due to the oil demand destroyed by the coronavirus, OPEC and industry sources told Reuters on Monday.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More