MOSCOW (MRC) -- China is both the biggest driver of future demand for crude oil, and the biggest risk to global refining as it will continue to hold much of the world's spare capacity, said Hydrocarbonprocessing.
The International Energy Agency's (IEA) medium-term oil market report, released on Wednesday, forecast that Asia, and particularly China, was the engine of crude oil and refined product demand growth up until 2028.
China is also expected to add the most amount of crude refining capacity over the period from 2022 to 2028, and hold the largest volume of spare capacity, according to the IEA, which acts as an energy adviser to developed nations. The report highlights that this presents both opportunities and risks for the global oil and product markets.
The main risk is that the world's reliance on China's exports of refined fuels increases, but China's exports aren't determined by market imperatives. Rather, China's refined product exports are subject to quotas granted by Beijing, which acts more in what it deems the interests of the domestic economy and markets, rather than what the global markets may be signaling.
The IEA said China had about 3 million barrels per day (bpd) of unused refining capacity at the beginning of 2023. It expects that China's unused capacity will rise to 3.2 million bpd by 2028 as additional refining units are added at a faster pace than throughput volumes.
Over the 2022-28 period China will add 1.5 million bpd of new refining capacity, taking nameplate capacity to 19.7 million bpd, but processing volumes are expected to rise to 16.5 million bpd over the forecast period.
We remind, U.S. crude oil stockpiles posted a surprise large build last week, while gasoline and distillate inventories gained more than expected. Crude inventories rose by 7.9 million barrels in the week to June 9, the EIA said, compared with analysts' expectations in a Reuters poll for a draw of 510,000 barrels. "U.S. crude inventories have jumped higher, hitting the brakes on today's rally, while builds to the products are somewhat inevitable given strong refinery runs," said Matt Smith.