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China’s decades-long boom in oil processing could falter this year in a blow to global demand and the aspirations of OPEC+ producers seeking to return supply to the market, reports Bloomberg.
Oil refining in the world’s top crude importer is expected to be flat or fall for the first time in data that extends back to 2004 — excluding a Covid-hit 2022 — according to most market watchers surveyed by Bloomberg. The IEA this week also reduced its processing forecast, but still sees a gain.
A prolonged property crisis has weighed on China’s economy this year, while the steady uptake of new-energy vehicles and trucks powered by gas are flashing bearish signs for future oil demand. The nation’s refiners are extending maintenance schedules to account for lower consumption.
China refined a record 14.76 million barrels a day last year — known as crude throughput — as demand rebounded after the pandemic, but the recovery is showing signs of faltering. The International Energy Agency said in a report Wednesday that the nation’s refinery runs slumped to Covid-era levels in April.
Of the six analysts and industry consultants surveyed by Bloomberg, three forecast a year-on-year decline in processing, while two predicted refining would remain flat. One projected a gain.
Jianan Sun, a London-based analyst with Energy Aspects Ltd, is in the camp that sees a decrease, along with industry consultants Mysteel OilChem and GL Consulting. Sun only recently flipped his estimate from an increase of 100,000 barrels a day this year to a loss of the same magnitude.
The prospect of lower Chinese demand presents OPEC+ with a dilemma when it comes to raising output this year, especially given supply from outside of the group is swelling. The alliance has said it can adjust or reverse production changes if needed, and some analysts think a boost is unlikely.
Benchmark oil prices have trended lower since early April on concerns about robust supply and soft demand, particularly from China.
