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Refinery cycles in China fell to their lowest in 15 months in August following a significant reduction in fuel export quotas and the latest wave of Covid-19, Reuters reports, noting that the average daily throughput amounted to 13.74 million bpd.
The decline in refinery production rates comes amid a government crackdown on independent refiners, the so-called teapots. These teapots now account for a considerable share of petroleum imports and fuel exports, which has contributed to a regional fuel glut that has depressed refiner margins.
Beijing moved involved investigations into alleged violations of environmental law and tax evasion. The government has also ordered state oil majors to stop trading their oil import quotas for teapots.
In addition, the authorities reduced the number of independent oil tankers allowed to import to 35% in June. Fuel export quotas have also been reduced.
Independent refiners account for a quarter of China’s refining capacity, which in June this year hit a new record rate of 14.8 million bpd. However, that was lower than the average daily pass rates for the first half of the year, which stood at 15.13 million barrels per day, according to data from Chinese customs officials released in July.
That figure, however, fell to 13.91 million bpd in July and, according to the latest data cited above, continued to decline in August. Meanwhile, thanks to record ascent rates earlier in the year, the eight-month average since the start of 2021 has been above the first eight-month average of 2020. That could change further if ascent rates continue to decline.
State refiners processed more oil in August to compensate for the decline in independent production resulting from quota cuts. But at least one, Sinopec, has no plans for further increases, according to the Reuters report, after the refiner said its fuel exports in August were 10% lower than the previous year.
By Charles Kennedy for Oil chauffage
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