China's May refinery output posts steepest annual fall in over a decade

SINGAPORE (Reuters) -China’s refinery throughput in May fell 10.9% from the same month a year earlier in the steepest year-on-year drop in at least a decade, data showed on Wednesday, as strict COVID-19 lockdowns slammed fuel demand.

FILE PHOTO: A Shandong Haiyou Petrochemical Group refinery is seen in Ju county, Shandong province, China July 25, 2018. Picture taken July 25, 2018. REUTERS/Dominique Patton

Crude throughput last month was 53.92 million tonnes, or about 12.7 million barrels per day (bpd), according to data from the National Bureau of Statistics (NBS).

Throughput inched up from 12.61 million bpd in April, which was the lowest in two years, but was a steep 1.55 million bpd below the year earlier level, according to Reuters records of official data.

Processing volumes for the January-May period were down 5.3% on the year at 277.16 million tonnes, or 13.4 million bpd.

Some independent refiners raised production marginally last month after steep curbs between February and April, and several major state refineries also returned from overhauls, but margins remained thin with demand stalling.

“Our refining margins were in the negative, and operations only began to recover slightly from late May with some early signs of easing in lockdowns,” said a trading manager with an independent refiner.

China’s demand for refined oil products has been falling since March because of tight lockdowns to contain the spread of the Omicron virus under a zero-COVID policy, with gasoline and aviation fuel the worst hit.

The slowing consumption has also prompted the government to release an additional batch of fuel export quotas to help ease swelling fuel inventories as well as to capture robust export margins.

The NBS data also showed 3.6% increase in crude oil production to 17.57 million tonnes last month, or 4.14 million bpd.

Production in the first five months rose 4.1% compared with a year earlier to 85.69 million tonnes, in the strongest growth in the last decade as state oil firms accelerated developing both conventional and unconventional resources following Beijing’s call to boost domestic supply security.

Natural gas production grew 4.9% in April to 17.7 billion cubic meters and output year-to-date rose 5.8% versus the same period of 2021.

Chinese consumers have shifted to using cheaper domestic natural gas as well as piped gas imports from Russia and central Asia while slashing imports of more pricey liquefied natural gas.

(1 tonne = 7.3 barrels for crude conversion)

Reporting by Chen Aizhu; Editing by Tom Hogue, Raju Gopalakrishnan and Richard Pullin