Chinese Refineries Post a 2.1% Increase in Output Over January and February

Chinese refiners booked a 2.1% increase in production over the first two months of the year as holiday travel pulled demand for fuels higher, helped by the start of a new refinery a few months earlier, Reuters has reported, citing China’s National Bureau of Statistics.

The increase came from state-owned refineries while private operators, the so-called teapots, reduced their run rates in January and February to tackle higher crude oil costs resulting from U.S. sanctions targeting Russian and Iranian crude, of which the teapots are big buyers.

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The Shandong Yulong refinery went online last September, ramping up to 90% of capacity at its crude oil processing unit in November, adding 200,000 barrels daily to overall demand for crude from the country’s refining industry. The facility’s second crude processing unit is set for starting this month, the Reuters report noted.

“Reduced runs from the teapot sector are likely to keep state-owned and mega-independent plants’ runs supported in the coming months even amid the state-owned maintenance season,” a Beijing-based analyst with Rystad Energy told Reuters.

Meanwhile, state-owned Chinese refiners are reducing their intake of sanction-burdened Russian barrels while teapots are boosting their. State-owned refining giant China Petroleum and Chemical Corporation, or Sinopec, as well as Zhenhua Oil, have suspended purchases of Russian crude oil loading this month, amid concerns over secondary sanctions, trade sources told Reuters this month. PetroChina and CNOOC were still buying Russian oil for March loadings, but at reduced rates, those sources, who remained unnamed, said.

The independent refiners, for their part, boosted purchases of Russia’s Far East flagship ESPO blend and more February-loading cargoes were delivered to the Shandong and Jiangsu provinces, primarily to teapot refiners, Vortexa has estimated. In January, the independent refiners preferred to reduce runs rather than seek alternative barrels amid uncertainties surrounding ESPO supply.

By Irina Slav for Oilprice.com

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