Daily Management Review

China limits processing of imported oil


04/28/2017


The Chinese authorities are putting on hold refining of imported oil due to fears of a glut of the domestic fuel market. World oil prices fell by 1.9% after this news.



Minghong via flickr
Minghong via flickr
"The Commission for National Development and Reform of China has stopped accepting applications from private refineries to process imported oil since May 5", said a spokesman of the commission’s, which oversees private refineries that process imported oil. 

Restrictions, however, do not apply to large state oil refineries owned by companies such as PetroChina or Sinopec.

The ban on accepting applications for the processing of imported oil has been introduced against the backdrop of growing concerns of the Chinese authorities about the internal excess refining capacity, Reuters reports.

Since 2015, China has allowed 22 independent oil refiners to import crude oil with a quota of 81.93 million tons, or 1.64 million barrels per day, thus accounting for 12% of the total volume of imports of crude oil in the country, reported the China Petroleum and Chemical Industry Federation (CPCIF).

In a report published on the federation's website on Wednesday, CPCIF warned of an increase in surplus capacity in the oil refining industry, which led to an up-ward movement in net fuel exports from China by 40-50% per year over the past few years. 

Excess production capacity in the PRC is expected to grow to 110 million tons, or 2.2 million barrels per day, by 2020 in accordance with the baseline scenario. At that, net fuel exports will increase to 50 million tons, or up to 15% of the total volume of fuel produced in China. 

In the end, China will overtake South Korea and India and will become the largest exporter of fuel in Asia, the CPCIF said.

In September 2016, China imported record volumes of crude oil, overtaking the US and becoming the leading buyer. Import of oil increased by 18% compared with the year before to 33.06 million tons, or 8.04 million barrels per day.

In late September, the volume of US purchases in four weeks was 7.98 million barrels per day, according to the US Energy Information Administration.

For the second time in 2016, China's imports exceeded US imports, reflecting the contracts signed in July, when resumed sales brought down oil below $ 42 per barrel. After that, oil recovered to about $ 50 per barrel.

Deliveries were made after Chinese factories reached the final stretch of the annual maintenance season, which usually occurs in the third quarter.

source: reuters.com






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