The downturn in the construction sector has hurt the fate of oil in China, which has had a direct impact on the country’s independent refineries, leading them to lower their diesel production levels.
This fuel, the main product of these refineries, popularly known as “teapots”, was in high commercial demand due to the booming real estate market.
Low volume of oil production in China
A recent Bloomberg report highlights that operating rates at these Shandong refineries have experienced a historic drop, reaching their lowest point in the last two years, and overall operating rates are at their lowest in less than nearly a decade.
According to an analyst at Mysteel OilChemAccording to a Mysteel OilChem analyst, demand for diesel has declined significantly in sectors such as mining and infrastructure, failing to meet previous expectations. However, the logistics sector shows a different behavior, although even there a shift towards LNG as an alternative to diesel for heavy transport can be observed.
China’s private refineries have faced numerous challenges at the start of this year, being caught between rising costs due to oil imports and tight refining margins. and squeezed refining margins. This is due to the fall in diesel prices in the domestic market, in a context of a weakening Chinese economy.
An optimistic outlook for the Chinese market
The profitability of private refineries has fallen drastically, with margins for several fuels plummeting by 50% in the last year. This decline continued to reach an all-time low in recent statistics, detailing a contrast with the previous year, which had been exceptionally positive and stable.
Despite the current challenges, last year the industry registered record figures in both crude oil imports and domestic production, demonstrating the resilience and adaptability of the sector.
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Source: Bloomberg
Photo: Shutterstock
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