China’s April Oil Refinery Output Drops to Two-Year Low Amid COVID Restrictions, Reports Reuters

BEIJING (Reuters) – In April, China’s crude processing decreased by 11% year-on-year, reaching the lowest daily throughput since March 2020 as refiners reduced operations amidst declining demand due to extensive COVID-19 lockdowns.

According to the National Bureau of Statistics (NBS), crude throughput for the month was 51.81 million tonnes, translating to an average of 12.61 million barrels per day (bpd). This figure marks a decline from 13.8 million bpd in March and 14.09 million bpd in April of the previous year.

During the January-April period, processing volumes fell by 3.8% compared to the same timeframe last year, totaling 223.25 million tonnes or 13.58 million bpd. The tightening lockdowns, which initially affected Shanghai and later spread across the country, led to a significant drop in demand for refined oil products, particularly impacting gasoline and aviation fuel sales.

In response to declining fuel sales and increasing inventories, Sinopec, a major state refiner, began scaling back operations starting in late March, lowering output to approximately 86% capacity, down from 92.5% earlier in the year. Independent refineries, primarily located in the eastern province of Shandong, operated at less than 50% capacity last month, many reaching their lowest levels since 2016.

One trading manager from a Shandong-based refinery commented, "Demand was terrible and margins were so thin that plants ended up losing more money if processing more crude oil."

Overall vehicle sales in China for April plummeted nearly 48% compared to the same month last year, as lockdowns disrupted factories and showrooms. The decline for vehicle sales over the first four months of 2022 was 12% year-on-year in the world’s largest automotive market.

Additionally, NBS reported a 4% increase in crude oil production to 17 million tonnes last month, equivalent to 4.14 million bpd, as national oil companies complied with directives aimed at enhancing domestic supply security. Year-to-date production also saw a 4.3% increase compared to the same period last year.

Natural gas production grew by 4.7% in April to 17.7 billion cubic meters, with output year-to-date up 6.2% from the previous year. High global natural gas prices, particularly for spot liquefied gas, have prompted consumers to rely more on cheaper domestic energy sources.