Chinese refiners are expected to set new records in crude oil production for the first time ever in the third quarter of 2019. The Reuters survey of 20 refiners projected the increase in production.
The increase in processing rates of the refineries in China is expected to result in a worsening surplus of refined oil products on the domestic market. Other refiners are also expected to reduce run rates or focus on chemicals to deflect direct competition in transportation fuels which will reduce the refining margins in China and the region.
China's customs data showed that Chinese refineries produced 102.49 million tons of crude oil. It is equivalent to 12.68 million barrels per day which is the highest on record. The recent output is 6.1 percent bigger compared to the last year during the same period. The majority of the processed crude came from crude oil imports which are higher than the record last year. China's import in February is 39.22 million tons of crude oil or 10.23 million barrels per day which is an increase of 21.6 percent on the year. The country's import increased by 4.8 percent from last year at 42.6 million tons or 10.03 million barrels per day.
According to Reuters' survey calculations, at least eight refineries in the country will pause its operations due to maintenance and overhauls in the second quarter which will result to a lower processing rate from April to June.
According to reports, at least one Sinopec refinery and another three owned by PetroChina plans a full plant overhaul. Two other refineries are scheduled to close parts of their crude oil distillation capacity for maintenance. The shutdowns are expected to last for 50 days which will cut 120, 000 barrels per day of crude oil in the output if spread over the course of the year.
The calculations, however, said that two refineries with a total of 800, 000 barrels per day in new refining capacity is expected to operate. The refineries will boost the overall Chinese refineries' processing rate which is projected to reach a new record of more than 13 million barrels per day. The increase, however, is expected to drag down margins as it further aggravates an already large oversupply of transportation fuel. The survey said that Zhejiang Petrochemical and Hengli Petrochemicals are expected to run at full capacity at 400,000 barrels per day by the end of the third quarter this year.
