Sep State-Owned Refinery Operating Rate Dropped on Tepid Sales
In September, both Saudi Arabia and Russia still maintained their output of crude oil at low levels, and the crude oil stocks in the U.S. declined as well. However, Saudi Arabia cut its official offers of crude oil, and the comeback of the COVID-19 in Europe impacted the global demand for crude oil. On the whole, most participants adopted a bearish attitude toward the crude oil market, and the overall international crude oil prices declined from August. As a consequence, in China, the National Development and Reform Commission reduced the retail ceiling prices of gasoline and diesel by RMB 315/mt and RMB 300/mt respectively.
During September, China’s refined oil market were full of bearish factors, and participants showed resistance to speculate in the market. Though September was the traditional refined oil demand peak season, the actual rigid demand was still limited. With the decrease in temperature, cars’ gasoline consumption for air conditions dropped. Meanwhile, many regions in China still suffered from continuous rainy weather, suppressing the demand for diesel. On the whole, the sales of refined oil in the market underperformed, and inventory pressure at most state-owned refineries remained severe.
According to SCI’s statistics, in September, the unit maintenance at state-owned refineries was relatively scarce. However, due to tepid sales, the prices of refined oil were in a downtrend. Accordingly, some state-owned refineries reduced their operating rates of CDUs. Up to September 27, the monthly average operating rate of CDUs at state-owned refineries in September was 75.65%, down 1.4% M-O-M and down 4.6% Y-O-Y.
In October, CNOOC Taizhou Petrochemical and PetroChina Jinxi Petrochemical will finish their unit turnarounds, while Sinopec Qilu Company and Sinopec Qingdao Company will shut down their units for maintenance successively. Meanwhile, Sinopec Wuhan Company plans to shut its units for a 2-month turnaround in Q4, 2020. Accordingly, the CDU shutdown capacity at state-owned refineries in October will not be less than that in September. In terms of refined oil demand, in October, the agricultural harvests in northern China and the decrease of rainy days in southern China will support the demand for diesel. Meanwhile, after China’s National Day holiday and the Mid-Autumn Festival holiday, some gasoline downstream users are likely to replenish their inventory. However, the gasoline market lacks the support of other bullish factors, which may lead to moderate overall gasoline consumption. Moreover, considering the high inventory of refined oil at state-owned refineries, most of them will still focus on cutting the inventory pressure first. On the whole, SCI reckons that in October, the overall operating rates of CDUs at state-owned refineries will fluctuate marginally, and the market supply of refined oil will remain ample.
