Refinery operations in China fell to a 15-month low in August, due to a significant reduction in fuel export quotas and the latest wave of Covid-19, according to Reuters, who noted that the average daily yield stood at 13.74 million barrels per day.
The decline in the refinery’s operating rates comes amid government crackdown on independent refiners, the so-called teapots. These teapots have accounted for a considerable share of oil imports and fuel exports, which have contributed to a regional excess of fuel that pushed refiners ’margins.
Beijing participated in investigations into alleged violations of environmental legislation and tax evasion. The government also ordered state oil companies to stop negotiating their oil import quotas with teapots.
In addition, authorities reduced the number of oil independents who are allowed to import to 35 percent in June. Fuel export quotas were also reduced.
Independent refiners account for a quarter of China’s refining capacity, which in June this year reached a new high in execution rates, at 14.8 million bpd. This, however, was lower than the average daily rates for the first half of the year, which stood at 15.13 million bpd, according to data from the Chinese customs authority released in July.
This, however, fell to 13.91 million bpd in July and, according to the latest data mentioned above, continued to fall in August. Meanwhile, thanks to record high execution rates at the beginning of the year, the average of eight months since the beginning of 2021 has been higher than the average of the first eight months of 2020. This could still change if the execution rates they keep sliding.
State refineries processed more oil in August to offset the drop in independent production resulting from quota cuts. But at least one, Sinopec, has no plans to increase further, according to the Reuters report, after the refiner said its fuel exports in August were 10 percent lower than a year earlier.
By Charles Kennedy for Oilprice.com
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