In anticipation of greater demand and a potential increase in fourth-quarter gasoline exports, at least three Chinese state-run oil refineries and a privately owned mega refiner are considering raising runs in October from September by up to 10%, according to sources with knowledge of the situation.
Chinese refiners anticipate Beijing may release up to 15 million tonnes of oil product export quotas for the remainder of the year in order to boost the flagging exports of the world's second-largest economy. Such a move would represent a change in China's export policy for oil products, increase global supplies, and lower fuel costs.
As per the traders, Chinese refiners have taken advantage of arbitrage opportunities to increase stocks after benchmark Brent crude prices recently dropped to below $100 a barrel. They have reserved supertankers to transport crude oil to China from the Americas and the Middle East.
According to a state refinery official, starting in September, his facility plans to increase runs by 10% to around 240,000 barrels per day (bpd). The official stated, "We're raising runs next month in preparation for a possible opening in exports, though nobody has a clear idea how big the opening would be."
Another official from another state refinery said that his facility is likewise expecting a throughput increase of roughly 8% for the following month, but he noted that the decision had been motivated by firmer domestic margins. One of the individuals stated that a third state refinery anticipates restarting a 60,000 bpd crude unit next month following maintenance.
Per the two individuals familiar with its operations, China's single largest refinery, Zhejiang Petrochemical Corp, which is capable of processing 800,000 barrels per day of crude, plans to ramp up runs in the coming months from the current levels of 700,000-750,000 bpd.
A ZPC official acknowledged the company is evaluating a run increase in light of emerging signs of economic recovery, but she refrained from going into further detail.
According to Chinese brokerage SHZQ Futures, the average refining rate at China's state-owned refineries increased to 73.74% as of last week, up 2.56% from the end of August.
Run rates at independent Shandong refineries, whose combined refining capacity makes about a fifth of China's total, also increased last week after declining for five weeks starting in mid-July.
The Very Large Oil Carriers (VLCC) lumpsum freight rates sailing from the United States have increased due to the recovery in China's crude demand. According to data from Simpson Spence Young on Refinitiv Eikon, trade between the Gulf and the Middle East and China reached its highest level since May 2020 at roughly $10 million.