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Chinese refineries processed a daily average of around 12.37 million barrels in May, or 371.34 million barrels (50.66 million tons). This is an 8.2-percent annual increase, according to the country’s National Statistics Bureau, as quoted by Reuters.
Over the first five months of 2018, refinery throughput stood at an average 12.2 million bpd, or a total 1.83 billion barrels for the five-month period. So far this year, China—along with India—has since the start of the year accounted for 69 percent of the forecast growth in crude oil demand, Reuters’ Clyde Russell noted in a recent column.
Independent refiners, commonly called teapots, were instrumental for this increase as they received higher import quotas from Beijing. But with rising oil prices this year, teapots found their margins squeezed lower and additionally pressured by the tax reform and a stricter enforcement of crude oil taxes across the country. This, Reuters reported in May, made them switch from crude oil to fuel oil as feedstock for their facilities.
Despite the healthy increase in refinery throughput over the first five months of the year, things could change as the new tax regime curbs profit margins and could limit teapots’ purchases of crude oil, potentially affecting demand growth in the world’s largest crude oil importer.
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The independent refiners’ import quotas and the fact that they started buying crude oil directly from the world’s oil exporting nations put them firmly on the international map three years ago and made them an important player in the global oil market. The purchases by independent refiners have grown to account for around a fifth of China’s total crude imports.
As of March 1, China introduced new tax regulations and reporting mechanisms in a crackdown on the tax evasion practices of independent refiners. The new tax rules benefit the big state-held Chinese refiners and have started to cut into the profit margins of the independents, Oilprice reported earlier.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.