China’s oil refinery output surged to its highest level in nearly two years, reaching a total of 15.2 million barrels per day (bpd) in June 2023. This marks an increase of 8.5% compared to the same month last year. The rise in production can be attributed to improved fuel margins and the conclusion of seasonal maintenance across the country’s refineries. Official Chinese data released on Tuesday highlighted this notable rebound in crude oil processing.
The previous months saw a decline in output due to extensive maintenance schedules. In May, refinery throughput fell by 1.8% year-on-year, dropping to approximately 13.92 million bpd, the lowest level since August 2022. This decline was largely influenced by maintenance operations conducted by significant state-run and private refineries in preparation for the anticipated peak driving season. April’s processing rates were slightly higher at 14.12 million bpd, yet still reflected a dip in overall activity.
Despite the reduced processing in May, China ramped up crude oil imports significantly during March and April. Analysts suggest these increased purchases may not directly translate into a rebound in fuel demand; rather, they indicate that refiners were taking advantage of cheaper crude options amid ongoing uncertainties regarding future sanctioned barrels.
As refiners returned to operations in June, crude oil imports surged to an average of 12.14 million bpd for the year, propelled by a substantial rise in deliveries from Saudi Arabia and Iran. Even with a general slowdown in gasoline and diesel consumption, refiners began to elevate their processing rates in anticipation of heightened demand expected in the third quarter.
The focus on capturing higher margins, particularly for diesel, has driven refiners to increase their output. As the summer travel season approaches, analysts project that strong demand from China will likely sustain high import levels and refining output into July. This robust demand is expected to exert upward pressure on oil prices in the weeks ahead, as the global market tightens more than previously anticipated.
According to Tsvetana Paraskova for Oilprice.com, the combination of increased refining activity and strong import figures reflects China’s strategic maneuvering in the global oil landscape, positioning itself as a significant player in the ongoing dynamics of crude oil supply and demand.
