China
posted a sharper growth in crude oil stocks in the first two months of
2018 as refinery throughput growth failed to match a relatively sharper
growth in supplies of the feedstock, a trend that Asia’s biggest oil
consumer is also likely to witness in March.
- China likely to see even higher stock levels in March
- Feeble demand for oil products discouraging run rates
- Crude oil arrivals seen recovering as logistics improve
Adding to this, weak demand for oil products at home was
also discouraging some state-run and independent refiners from keeping
run rates at higher levels, market participants and analysts said.
The country’s crude stocks rose by 69 million barrels by the end of
February, compared with levels seen in end-December. The change in
volumes in the two-month period was 3.1% higher than the increment of 67
million barrels that was seen in the same period a year earlier,
S&P Global Platts calculations based on latest official data showed.
“Demand for oil products is slower than expected, and this will further weaken China’s throughput in March,” Wang Zhuwei, senior analyst with S&P Global Platts Analytics, said. “Usually, demand for oil products sees a recovery in March following the [Lunar] New Year holidays,” he added.
Gradual restocking of gasoline was seen at private storage tanks
during the first two weeks of March. Those weeks witnessed a
year-on-year growth of 4.5% in gasoline stocks, faster than the
year-on-year growth rate of 2.7% in same period of last year, according
to JLC data.
China does not release official data on stocks. Platts calculates the
country’s net build or draw on crude stocks by subtracting the official
refinery throughput data from the country’s crude supply data. The latter takes into account net crude imports and domestic production.
Latest data from the General Administration of Customs showed China’s crude oil imports
over January-February jumping 10.8% from a year ago to 9.06 million
b/d, pushing up the country’s crude supplies over the two-month period
by 6.9% year on year to 12.78 million b/d.
China’s crude oil imports are expected to rise to over 9 million b/d
in March, from 8.45 million b/d in February, as logistics returned to
normal after the Lunar New Year holidays, market sources said.
Throughput
Data from the National Bureau of Statistics showed that the
country’s overall throughput rose 7.3% year on year to 11.6 million b/d
in the January-February period, with the startup of PetroChina’s and
CNOOC’s new facilities in the second half of 2017. Independent
refineries also lifted their average operating rates by 11 percentage
points to 67.7%.
Looking ahead, crude oil stocks would continue to rise in March as imports are set to pick up, trade sources said.
Platts survey showed that an estimated 2.27 million b/d of crude oil
would be discharged for independent refineries at the Tianjin and
Shandong ports in March, 10.7% higher than the 2.05 million b/d
discharged in February.
But independent refiners have cut throughput in March because of
relatively narrower profit margins amid tighter consumption tax controls
and slow demand for oil products.
Independent refiners without crude quotas are not allowed to crack
imported crude oil. These refiners had used loopholes in the old tax
reporting system to report their crude oil purchases as fuel oil in
order to avoid the taxes, and also being able to crack crude oil.
But this loophole has closed. All companies are now required to book
their deals using a new tax reporting system — effective from March 1 —
which would be able to track the entire transaction chain for every
crude oil cargo. Moreover, the tax cost for refining crude had also
risen following the implementation of the new system, discouraging
buying of cargoes.
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