China Refined Products Demand Recovers to Normal Levels

SCI99

2020-06-16

China Refined Products Demand Recovers to Normal Levels

The new coronavirus which is called COVID-19 began to influence China in early 2020. China’s macro economy, industrial production and logistics were influenced greatly by the coronavirus outbreak. In the first quarter of 2020, China’s GDP dropped by 6.8% from the same period of 2019. Regarding the crude oil refining industry, the coronavirus outbreak mainly influenced refineries’ production and the refined oil market demand.

According to SCI Oil Refining Industry Data and China Petroleum Monthly, in the first quarter of 2020, China’s crude oil processing volume was 144.621 million mt, down 4.8% from the same period of last year. The average operating rate of China’s refineries was around 68%, down 6% from the average operating rate in 2019. The average operating rates of state-owned refineries and traditional independent refineries dropped by over 10%, but the operating rates of Hengli Petrochemical and Zhejiang Petroleum & Chemical were still over 90% in the first quarter.

The coronavirus also caused sharp reduction in the market demand for refined oil. In the first quarter, China’s vehicle sales volume was only 3.67 million, down 42% from the same period of last year. The vehicle industry covers around 8% of China’s GDP, and over 95% of the gasoline consumption is in the vehicle industry. Some provinces released policies to support the vehicle industry. The gasoline and diesel retail sales volume at Sinopec and PetroChina dropped by around 48% in February from the same period of 2019. The average operating rate of CDUs at Shandong independent refineries was 45.08% as of February 26, and that at state-owned refineries dropped to around 70% then.

But then, international crude oil prices went down in March, and China’s retail ceiling prices of gasoline and diesel triggered the floor prices in the pricing mechanism. With the control of the coronavirus spread in China, the domestic demand for gasoline and diesel improved gradually. In March, according to SCI Oil Refining Industry Data, the gasoline and diesel retail sales volume at Sinopec and PetroChina increased by 72% from February and reached 78% of that in March 2019. China’s crude oil processing volume was 47.242 million tons in March, up 15.48% M-O-M. The gasoline output was 12.3171 million tons, up 7.05% M-O-M. The diesel output was 14.3333 million tons, up 7.88% M-O-M.

China’s gasoline and diesel consumption continued rising in May, and in particular, the gasoline consumption increased obviously. More and more private car travels were seen in the month, and gasoline and diesel retail companies raised their purchase volume from refineries. According to SCI, the gasoline and diesel retail sales at Sinopec and PetroChina in May 2020 was around 96% of that in May 2019. China’s refined products’ demand has recovered to the normal levels mainly by now.

According to SCI, the average operating rate of Chinese state-owned refineries was 73.65% as of June 15, up 1.97% from the end of May. SCI follows operating rates of 69 state-owned refineries with the total CDUs capacity of 575 million mt/a. In the second half of June, Sinopec Tianjin Company and PetroChina Dalian Petrochemical will remain in turnarounds, and other state-owned refineries are scheduled to run their units stably. The state-owned refineries’ average operating rate will be high in the second half of June.

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