China crude oil runs rebound in April as fuel demand picks up

Visitors at Shanghai Disney Resort. Easing of travel restrictions will push up China’s fuel consumption. (Reuters)
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Updated 16 May 2020

China crude oil runs rebound in April as fuel demand picks up

  • Good news for Gulf exporters as demand in key market recovers after easing of coronavirus lockdown

BEIJING: China’s daily crude oil throughput rebounded in April from a 15-month low in March as refiners cranked up operations to meet renewed fuel demand after lockdowns imposed
to prevent the spread of the coronavirus outbreak were eased.

The country processed a total of 53.85 million tons of crude oil last month, data from the National Bureau of Statistics (NBS) showed on Friday, equivalent to about 13.1 million barrels per day (bpd). That was some 11 percent higher than 11.78 million bpd in March.

The agency said on Friday it had adjusted the database of industrial enterprises it uses to help compile a range of production numbers. On that basis, Friday April’s crude oil throughput was 0.8 percent above the year-ago level, it said; a Reuters calculation using NBS data from last year put the rise at 3.4 percent.

“In terms of year-on-year percentage change, we only included the companies that existed in both years,” a spokesperson from the agency’s media relations department told Reuters.

“For instance, if a company existed in 2019 but does not exist in 2020, then their figure in 2019 will not be included in 2020 year-on-year percentage calculation.”

Analysts said it would not be not surprising for the agency to revise its year-ago numbers.

“We’ve noticed over the years that the bureau tweaks the refinery output figures often toward end of the year due to under-reporting or delays in data providing by some plants,” said Seng Yick Tee, senior director at consultancy SIA Energy.

Crude runs during the first four months of 2020 in China were 203.48 million tons, according to Friday’s official data, equal to 12.28 million bpd, representing a 3.4 percent drop from a year earlier.

Based on Reuters’ calculations using numbers the bureau published last year, the January-April decline would have been 1.9 percent.

The country’s gasoline and diesel consumption is expected to pick up in the second quarter as factories resume operations and travel restrictions are further relaxed.

Traffic congestion in big Chinese cities has exceeded levels before the coronavirus outbreak as commuters use more private cars to avoid public transport.

Amid the demand pickup, China’s independent, or “teapot” refineries were motivated to ramp up production to take advantage of high profit margins of 870 yuan ($122.63) a ton in April after crude oil prices dropped, Wang Zhao, an analyst at oil industry information consultant Sublime said, speaking before Friday’s data release.

That “theoretical margin” is up from 759 yuan a ton in March, he said.

Meanwhile, the monthly average capacity utilization rate at teapot refiners rose to a record 73 percent in April, according to data tracked by Sublime

State-backed refiners have pushed up crude oil processing rates to around 79 percent in May, according to estimates from consultancy Longzhong Information Group, close to January’s 82 percent level before extensive movement restrictions were imposed to prevent the coronavirus spreading.

The statistics bureau also reported that China’s oil output in April rose to 15.87 million tons, up 0.9 percent from the same month a year earlier. Over the January-April period, China pumped out 64.44 million tons of crude oil, up 2 percent on the year.

Natural gas output expanded 14 percent last month to 16.1 billion cubic meters (bcm), the bureau reported, while January-April production grew 10 percent to 64.4 bcm.

Oil surges on hopes of new deal on output cuts

Updated 02 June 2020

Oil surges on hopes of new deal on output cuts

  • Brent price has doubled in five weeks
  • OPEC talks may be brought forward

DUBAI: Oil prices surged toward $40 a barrel on Monday as hopes rose for an early agreement to extend the big production cuts agreed by Saudi Arabia and Russia under the OPEC+ alliance.

Brent, the global benchmark, jumped by more 9 percent to nearly $39, continuing the surge that has doubled the price in five weeks — the best performance in its history. It recovered after record supply cuts agreed between the 23 countries of the OPEC+ partnership, and enforced cuts in US shale oil.

DME Oman crude, the regional benchmark in which a lot of Saudi Aramco exports are priced, rose above $40 a barrel for the first time since early March.

Market sentiment was buoyed by the possibility that the Organization of Petroleum Exporting Countries would agree with non-OPEC members to extend the cuts for a longer period than was agreed in April.

Oil analysts expect OPEC to fast track a “virtual” meeting to formally agree to maintaining cuts at the record 9.7 million barrels a day level. The meeting was scheduled for June 9, but bringing it forward would allow producers more time to set pricing levels.


This section contains relevant reference points, placed in (Opinion field)

An official with one OPEC delegation told Arab News there was consensus among the 23 OPEC+ members for the new date, which could be as early as June 4. The meeting will also consider how long the current level of cuts would be maintained. Some OPEC members want it to run to the end of the year, other producers would prefer a two-month extension.

Omar Najia, global head of derivatives with trader BB Energy, told a forum run by Gulf Intelligence consultancy: “I’d be amazed if OPEC did not extend the higher level of cuts. As long as Saudi Arabia and Russia continue saying nice things to each other I’d expect the rally to continue.”

A Moscow source close to the oil industry said energy officials there had come to the conclusion that “the deal is working” and it was important to keep prices at an “acceptable” level.

Sentiment was also affected by a comparatively high level of compliance with the new cuts, running at about 75 percent among OPEC+ members, with only Iraq and Nigeria noticeable under-compliers.

Robin Mills, chief executive of Qamar Energy, said: “That’s where I’d expect it to be after two months in such a fluid situation. It will be even better in June.”