MOSCOW (MRC) -- China's refined oil product exports in November are set to hit the highest since April 2020 as refiners ramp up output to multi-month highs to boost diesel supply and profit, offsetting the impact of slower domestic demand from COVID-19 restrictions, said Reuters.
The world's top two refiners - the United States and China - are processing more crude to meet higher diesel use globally this winter as countries switch to oil for heating, away from more expensive natural gas. The increased output could also cool prices for other oil products, especially for gasoline, and dampen overall refining margins.
China's crude oil throughput could rise by up to 500,000 barrels per day (bpd), or 4% this month over October, as two new refineries - PetroChina Guangdong Petrochemical and private firm Shenghong Petrochemical - prepare to start operations, three Beijing-based industry sources told Reuters.
Half of the increase, though, will still come from Asia's biggest refiner Sinopec (600028.SS), one of them said, as it raises output to produce more diesel and raise fuel exports. "Crude runs are estimated to increase to around 14.4 MMbpd in November," said senior analyst Daphne Ho at consultancy Wood Mackenzie.
That compares with around 13.8 MMbpd of throughput in September. Official output data for October will be released on Nov. 15.
Sinopec's major coastal plants are expected to raise throughput moderately or extend high operation rates from October, with production geared towards diesel at the expense of gasoline, company sources told Reuters.
"Gasoline demand is not good but diesel inventories are thin. So the mandate from the headquarters is to boost diesel production to supply the domestic market and also to raise exports," one of the Sinopec sources said.
A Sinopec spokesperson declined to comment.
Further boosting supply, China's largest private refiner Zhejiang Petroleum and Chemical Co (ZPC) is raising diesel output by cutting petrochemical production.
We remind, China produced a record volume of gasoil in September as refiners ramped up production ahead of winter and sought to capitalise on high export prices. Output reached just over 17 million tonnes, up 26 per cent from August, noted China’s National Bureau of Statistics on Wednesday. Domestic demand is set to rise with winter approaching, but there are export dollars to be earned as well with refining margins rising to around USD40 a barrel in Asia, according to Refinitiv, a unit of the London Stock Exchange Group.