Sluggish demand cuts China's crude oil processing

Since China's domestic petroleum inventory levels are high, refineries are forced to cut their crude oil processing.

China's crude oil imports in March dipped 2.1% on year to 5.45 million barrels per day, according to the General Administration of Customs. Accumulated crude oil imports in the first quarter fell 2.3% on year to 5.61 million bpd. Meanwhile, imports of petroleum products in Jan-Mar decreased 3.4% from a year ago.

Crude oil processing by Chinese refineries rose 3.0% on year to 10.01 million bpd in the first two months in this year. Therefore, crude oil imports seemed not enough for consumption.

However, China imported more crude oil than actual demand in the first half of 2012 in order to fill up the newly built strategic reserve facilities. Supply for the strategic reserve was estimated at about 400,000 bpd.
If strategic reserve is deducted, China's recent crude oil imports might be about 6% higher than a year ago. Current crude oil supply might be excess.

Commercial crude oil inventory level in China as of end-February was 2.9% lower from a month ago, according to Xinhua News Agency. Meanwhile, stocks of petroleum products rose 6.0% from a month earlier. It suggests that refiners processed amply imported crude oil but shipments of products were not enough.

Crude oil imports were steady in March but imports of petroleum products fell 20.2% on year. The slump of products imports proves current high inventory levels of petroleum products. It is natural that refiners decide to cut their operating rates.

Sinopec was reported to cut its crude oil processing in the second quarter from originally planned 59.8 million tonnes to 58.3 million tonnes.
Since the major state-owned company is said to reduce April processing plan by 1 million tonnes, it seems must reduce inventories urgently.

Those lower processing rates would influence on the nation's  crude oil imports in the near term.

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