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China Refineries Process Less Oil As Fuel Prices Decline

Chinese refinery runs stood at 12.28 million bpd last month, higher than the same time last year but lower than the previous month and the month before, when runs reached an all-time high of 12.49 million bpd, Reuters reports, citing Chinese statistics data.

The monthly decline came on the back of lower international oil prices and a consequent lowering of fuel prices that pressured refiners’ margins. But sales of fuels also slowed down during the month, which also contributed to refiners’ decision to process less crude.

Reuters also notes, however, that the average daily processing rate for the 11 months of 2018 is on track to beat previous records, standing at 12.12 million barrels, or a total of 554.48 million tons.

Refinery throughputs in the world’s second-largest consumer of oil were earlier this year affected by a tax regime overhaul that squeezed the profit margins of the so-called teapots—the independent refiners that have spearheaded China’s oil consumption increase in the last three years.

Run rates began to recover in August and in September they hit an all-time high as demand flourished after maintenance season. October was also strong on the back of higher demand for fuels amid still strong economic growth, but also on the back of higher demand for crude oil inventories ahead of the start of winter.

China is on track to become the leader in global refinery capacity expansion and investments with 3.12 million bpd additional refining capacity and US$67.3 billion in capital expenditures through 2022, data and analytics company GlobalData said in a recent report. Ten new refineries are scheduled to launch by 2022, which, some industry insiders have warned, will leave the country with stranded capacity at some later point.

This month one new refinery is scheduled to come online, with a capacity of 400,000 bpd. The owner, teapot refiner Hengli Petrochemical, said it will carry out test operations at the site.

By Irina Slav for Oilprice.com

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