China's top fuel producers are set to raise April crude throughput by a combined 755,000 barrels per day (bpd), or 10% from March, as domestic fuel demand picks up after being hammered by the coronavirus outbreak.
The increase, calculated by Reuters based on interviews with six industry sources, shows China bucking the global trend of refiners deepening output cuts to cope with slumping demand amid nationwide lockdowns in the global pandemic.
Sinopec, Asia's top refiner, is expected to raise throughput by at least one million tonnes in April from March, or 400,000 barrels per day (bpd), said three industry sources with knowledge of Sinopec operations.
All of the sources interviewed for this story declined to be named as they're not authorized to talk to media. After the increases, Sinopec will be producing close to 4.5 million bpd, up from under 4 million bpd estimated for February when Sinopec made the deepest production cuts in decades to operate its refineries at two-thirds of capacity after the outbreak slashed fuel demand.
The April level, however, would still be about 480,000 bpd, or 10%, below the average processing rate last year at 4.98 million bpd. Meanwhile No.2 state refiner PetroChina is expected to hike output by around 165,000 bpd to 2.92 million bpd, said two of the sources.
"Chinese fuel demand is rebounding, but only at a modest pace, as resuming (domestic) economic activity was somewhat offset by a steep fall in exports," said Wang Zhao, analyst with commodities consultancy Sublime Information Co. Among fuels, demand for diesel is recovering the fastest as China pumps up spending on infrastructure and as manufacturing recovers, but plunging export orders are capping growth.
Gasoline consumption is also recovering, with more cars on the roads as people avoid public transportation, albeit over shorter distances. Massive cancellations of international flights will keep aviation fuel in the doldrums. Smaller state-run refiner CNOOC will operate its 240,000 bpd Huizhou phase-1 plant at full rates in April, after ramping it up in March from a cut of 8% in February, said a source with direct knowledge of the plant's operations.
"The idea is to quickly draw down the higher-cost crude inventories to allow for processing cheaper purchases that are arriving," said the source. Still, these run rates are subject to changes as refiners are now adjusting production plans by the week, or even twice a week to quickly respond to unpredictable market changes, state oil executives said, rather than once a month.
Sinopec, PetroChina and CNOOC didn't respond to requests for comment. In the private sector, Hengli Petrochemical Co Ltd and Zhejiang Petrochemical Corp are both ramping up production this month to nearly 110% of their nameplate capacity at 400,000 bpd each, up from 100% in March, senior company officials told Reuters. (1 tonne = 7.3 barrels for crude conversion)
(Reporting by Chen Aizhu; Editing by Tom Hogue and Kenneth Maxwell)
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