Chinese Refining Boom Runs Out of Steam

Growth in the petroleum refining sector in China is beginning to lose momentum in what could become a disappointing turn of events for OPEC+.

A survey carried out by Bloomberg among six market analysts and consultants points to flat refining output this year in China or even a decline. It would be the first decline since 2004, the publication noted in a report on the results of the survey.

Last year, total refining output in China hit 14.76 million barrels daily. It was a record but this year may not see another one, because of the real estate crunch, which has affected demand, per Bloomberg.

The International Energy Agency also expects a slowdown in Chinese refining output, saying in its latest report that refining rates had fallen to pandemic lockdown levels in April. It bears noting, however, that April was maintenance season for Chinese refiners.

These refiners, however, have been struggling with declining margins since the start of the year after a record 2023. With oil prices higher and demand faltering in some key markets such as construction, life has become less wonderful for many of the so-called teapots, hurting their own demand for crude. That’s despite abundant access to discount crude from Iran and Russia, too.

Still, some analysts such as Rystad Energy see refining output rising in China this year. Yet the rise is modest, at 150,000 bpd, Bloomberg reported. Earlier, Rystad Energy predicted output growth of 250,000 bpd.

FGE, on the other hand, has predicted flat output, which is a revision on an earlier forecast that saw growth of 200,000 bpd. The firm’s analysts project some 1 million bpd remaining as spare capacity after the end of this year’s maintenance season. Energy Aspects analysts are the most pessimistic, expecting a dip in Chinese refining output this year.

By Irina Slav for Oilprice.com

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