Oil Refiners' Output Slumps as Lockdowns Dampen China Demand

China’s oil refiners saw output in May fall by the steepest year-on-year drop in at least 10 years, as coronavirus lockdowns hit fuel demand.

The country’s refineries processed 53.92 million tonnes of crude oil, or about 12.7 million barrels per day (bpd), according to the National Bureau of Statistics (NBS).

Some independent oil 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,” a trading manager with one of China’s independent oil refiner said.

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.

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

China’s demand for refined oil products has been falling since March because of tight lockdowns to contain the spread of the Omicron variant of coronavirus. Petrol and aviation fuel consumption has particularly slumped.

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Production Rises 4.1%

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.

State oil firms accelerated development of 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 metres and output year-to-date rose 5.8% versus the same period of 2021.

Reuters, with additional editing by George Russell

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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.