Chinese refiners are expected to process more than 13 million barrels of crude oil per day for the first time ever in the third quarter this year, a Reuters survey of 20 refiners showed on Monday.
The rise in processing rates at China's refineries is also expected to result in a worsening glut of refined oil products on the domestic market, and some refiners may opt to reduce run rates or focus on chemicals in order to avoid direct competition in transportation fuels, which will further dampen refining margins in China and the region.
In the first two months of 2019, Chinese refineries processed 102.49 million tons of crude oil, or 12.68 million bpd-the highest on record and a 6.1-percent increase compared to the same period last year, according to China's customs data.
Most of the processed crude came from imports of crude oil, which continued to increase this year compared to the same months of 2018. In February, China imported 39.22 million tons of crude, or 10.23 million bpd, up 21.6 percent on the year. In January, imports stood at 42.6 million tons or 10.03 million bpd, up 4.8 percent on the year.
Going forward, at least eight refineries in China will enter maintenance or overhauls in the second quarter, which will result in lower processing rates in April-June, according to the Reuters survey and calculations.
But then in Q3, a total of 800,000 bpd in new refining capacity from two large refineries is expected to come online, likely boosting the collective Chinese refineries' processing rate to a new record of more than 13 million bpd, but dragging down margins as it would exacerbate an already large transportation fuel oversupply.
Zhejiang Petrochemical and Hengli Petrochemicals are each expected to have their respective 400,000-bpd refineries up and running at full capacity by the end of the third quarter this year, according to the Reuters survey.
By Tsvetana Paraskova for Oilprice.com
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