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OPEC+ Rumors Send Oil Prices Diving

OPEC+ Rumors Send Oil Prices Diving

Oil prices dived sharply on…

China’s No.2 Refiner Cuts Fuel Output, Could Defer Oil Cargoes

As the coronavirus continues to batter fuel demand in China, the country’s second-largest refiner, state-held PetroChina, is cutting refinery runs and is talking to key suppliers in the Middle East about possibly deferring some crude oil loadings or reducing volumes, a senior PetroChina official with direct knowledge of the plans told Reuters on Monday. 

The Chinese refiner doesn’t see fuel demand rebounding in March, the official told Reuters, adding that PetroChina is in discussions with its major suppliers in the Middle East—including Saudi Arabia, the United Arab Emirates (UAE), and Kuwait—about potentially deferring crude cargo loadings or cutting imports from those suppliers.

Should PetroChina, and other Chinese refiners for that matter, cut loading volumes or defer cargoes, the oil glut on the market in Q1 will swell even more than analysts and OPEC had predicted.  

PetroChina will be reducing its crude oil throughput by 320,000 barrels per day (bpd) in February compared to its original refinery run plans, the official told Reuters. The February cut would be equal to around 10 percent of PetroChina’s average fuel production of some 3.32 million bpd, according to Reuters estimates.

Related: OPEC’s Oil Production Plunges, But It May Not Be Enough

PetroChina joins other refiners in the world’s top oil importer to have trimmed crude processing rates as the deadly virus outbreak is crippling demand with all the travel restrictions and thousands of canceled flights to, from, and within China. Due to weak fuel demand and depressed industrial activity, Chinese refiners—from the biggest refiner in Asia, Sinopec, to the independent refiners in Shandong—are cutting refinery runs, while commodity trading houses and oil majors are scrambling to find spot buyers for crude oil outside China.  

According to estimates from IHS Markit, the virus outbreak is set to knock out at least 1.7 million barrels per day (bpd) of refinery runs in China in February, compared to an otherwise projected growth of 760,000 bpd. This would be “the sharpest single-month decline of 1 MMb/d in history,” Xiaonan Feng, Research Analyst at IHS Markit, said last week.  

The slowdown in China’s industrial activity and the shutdown of factories amid the coronavirus outbreak is causing the worst shock to oil demand in over a decade, Jeff Currie, global head of commodities research at Goldman Sachs, said last week.  

By Tsvetana Paraskova for Oilprice.com

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