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China Refinery Runs Fell To 15-Month Low In August

Refinery runs in China fell to the lowest in 15 months in August on the back of a sizeable cut in fuel export quotas and the latest wave of Covid-19, Reuters reports, noting that average daily throughput stood at 13.74 million bpd.

The decline in refinery run rates comes amid a government crackdown on independent refiners—the so-called teapots. These teapots have come to account for a considerable portion of oil imports and fuel exports, which have contributed to a regional fuel glut that pushed down refiners' margins.

Beijing moved has involved investigations into alleged violations of environmental legislation and tax avoidance. The government also ordered state oil majors to stop trading their oil import quotas with teapots.

In addition, the authorities reduced the number of oil independents that are allowed to import by as much as 35 percent in June. Fuel export quotas were also reduced.

Independent refiners account for a quarter of China's refining capacity, which in June this year hit a new high in run rates, at 14.8 million bpd. This, however, was lower than the average daily run rates for the first half of the year, which stood at 15.13 million bpd, according to data from the Chinese customs authority released in July.

This, however, fell to 13.91 million bpd in July, and per the latest data cited above, continued to fall in August. Meanwhile, thanks to record-high run rates earlier in the year, the eight-month average since the start of 2021 has been higher than the average number for the first eight months of 2020. This could still change if run rates continue to slide.

State refiners processed more oil in August to offset the fall in independents' output resulting from the quota cuts. But at least one, Sinopec, has no plans for further increases, according to the Reuters report, after the refiner said its fuel exports in August were 10 percent lower than a year earlier.

By Charles Kennedy for Oilprice.com

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