At 10.71 million bpd, China's crude refineries saw in July their lowest daily throughput rate since September last year as state firms and independent refineries, both swimming in inventory, continue to duke it out with price as their weapon.
According to data released by China's National Bureau of Statistics (NBS) on Monday, reported by Reuters, China processed 10.71 million bpd of crude in July-500,000 bpd lower than the throughput in June.
But between January and July, Chinese refinery production increased by 2.9 percent annually to 320.7 million tons, equal to a rate of 11.04 million bpd, Reuters reports, as per official statistics data.
In June, Chinese refineries had processed 11.21 million bpd of crude oil, up by 2.3 percent on the year and the second-highest daily processing rate on record. The highest daily rate was hit last December, when refineries processed 11.26 million bpd.
However, state refiners have been facing competition from the independent refiners, the so-called 'teapots', which were allowed in June a second batch of crude oil import quotas for this year, adding to the oversupply of refined products on the domestic Chinese market.
Now the lowest refinery runs in 10 months, at a peak demand season, is creating some concern about Chinese oil demand growth.
"Runs were slightly below our expectation, as fuel demand growth remained tepid and stocks were brimming," Harry Liu, a downstream consultant at IHS Markit, told Reuters.
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At the beginning of the summer, China's refineries were expected to shut nearly 10 percent of the country's 15.1-million-bpd refinery capacity in the third quarter-the peak demand season. Grappling with domestic surplus of gasoline and diesel, some Chinese refineries-including such owned by giants like Sinopec and PetroChina-were said to be cutting refinery runs in the third quarter, while others planned to shut for maintenance.
According to IHS Markit's Liu, who spoke to Reuters, Sinopec has also started cutting third-party purchases from the teapots from June, which in turn caused the independents to reduce their production as well.
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