China's Shandong independent refineries cut run rates to 65% in Nov

China's Shandong independent refineries have lowered crude run rates slightly to 64.6% in November, down from an eight-month high of 67.4% in October, a monthly report from local information provider JLC showed.

However, the November run rates were still higher from the average run rate of 62.7% over January-October, although down from the November 2017 run rate of 67.3%.
The lower run rates, was mainly due to weakening refining margins, because some refineries chose to lower throughput or shutdown for a while.

The refining margins for cracking imported Oman crude have fallen into negative territory, to a loss of around Yuan 174/mt ($25/mt), down by Yuan 368/mt, according to JLC's calculations.

This had forced a few small sized independent refineries to shutdown units for some days, including Wudi Xinyue Petrochemical, Fuyu Petrochemical and Zhonghai Fine Chemical. Other refineries in Binzhou, Dongying and Zibo had also cut throughput accordingly.

"There have been quite a lot of checks from government bodies, as well as unnamed underground checks throughout the month, aiming at the sales of oil products. This had also affected the production and sales at some refineries," a JLC analyst said.

Looking into December, the run rates are likely to stay flat or slightly lower, with the demand of oil products, especially gasoil cooling down in winter, according to JLC analysts.

JLC's survey covered 43 independent refineries, which accounted for about 58% of the country's total independent capacity. JLC is a Beijing-based information provider, formerly known as JYD.

GASOIL STOCKS HIT A 46-MONTH HIGH
With temperatures lower in winter, the demand for gasoil from outdoor construction projects also cooled, with stocks accumulating to a historical high of 750,000 mt in November.

"Independent refineries found it difficult to sell out gasoil, as demand seemed to have vanished in northern China," the analyst said.

This high stocks came despite a sharp price drop for gasoil, which fell by about 12% to around Yuan 7,000 (1,014)/mt in November.

In comparison, the price of gasoline had fallen by around 15.6% month on month to around Yuan 7,270/mt for 92 RON gasoline in the Shandong market.

Gasoline demand, which was low compared with that before the National Golden Week holiday in September, was still supported by daily driving activity.

"Gasoline demand is likely to be pushed up slightly by the holiday driving mood, around the New Year holiday. But there might be little hope for gasoil demand to pick up in a short time," the analyst said.

FEEDSTOCK CONSUMPTION MARGINALLY LOWER
Feedstock consumption at the 43 refineries surveyed dropped marginally to 9.285 million mt in November, down 0.26% on the month from a record high of 9.31 million mt in October.

Except 40,000 mt of bitumen blend -- 30,000 mt by Yuhuang Petrochemical and 10,000 mt by Xintai Petrochemical -- the remaining feedstock cracked were all crudes, with 85% of them imported crudes.

The consumption of Merey crude continued to fall to 230,000 mt in November, the lowest level since May 2013. It was also down by 50% month on month from October.

This has also forced independent refineries to find substitution feedstock for asphalt production, like Cold Lake or Basrah Heavy, to replace Merey crude.

Among all the imported crudes cracked by more than 30 Shandong-based independent refineries with crude import quotas, ESPO remained the highest at around 1.5 million mt, down 8.3% month on month.

Lula was still the second crude favored by independent refineries last month, with 1.11 million mt cracked, up 7.8% month on month.