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The throughput of Chinese refineries last month averaged 14.08 million bpd last month, up by 19.7 percent on the year thanks to the recovery in demand for fuels and China’s stocking up on finished products before maintenance season begins.
Reuters reports the total amount of crude that passed through Chinese refineries during March was 59.79 million tons, and while a substantial increase on the year, it was lower than the throughput of Chinese refiners during the first two months of the year. The total refinery throughput for the first quarter stood at 174.04 million tons, which was 16.5 percent higher than the total for the first quarter of 2020 when China was in the grips of the pandemic.
The increased refinery throughput was made possible by a strong rise in crude oil imports last month. At 21 percent, the annual increase in imports lent some support to hesitant oil prices, although the effect wore off relatively quickly, especially as reports noted that the March average in imports was lower than the February average, suggesting a pending reversal of the trend. Indeed, as maintenance season begins, imports will most likely decline.
Oil refining has turned into one of China’s fastest-growing industries after the government allowed private companies to set up refineries. Private refiners, commonly referred to as teapots, became the driver behind the country’s growing imports and fuels output that undermined the margins of other Asian refiners. Yet, they also contributed to what has now become excess refining capacity.
Bloomberg reported earlier this month that Beijing is taking steps to curb this overcapacity. For now, these involve a series of inspections at more than 50 private refineries, set to begin this week. This clampdown could result in refinery closures, which would, in turn, affect imports—and international oil prices—negatively.
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.