OIL PRODUCTS: China’s Refining Sector Faces Shakeout: Reuters

Up to 10% of China’s oil refining capacity faces closure in the next 10 years as a premature peak in Chinese fuel demand crushes margins, Reuters said.

• Adding further pressure on the sector is Beijing’s drive to improve efficiencies and phase out older and smaller plants.
• Tighter US sanctions enforcement could drive margins negative as access to discounted sanctioned barrels is shut off.
• Some teapots in Shandong run almost completely off sanctioned barrels from Iran, Russia, or Venezuela.
• The world’s second-largest refining industry has been long plagued by excess capacity. growth.
• Shandong teapots cut run rates to the lowest since Nov. 8 at 50.68% of capacity in the week to Jan. 17, OilChem said.
• Rapid electrification and lacklustre economic growth have made the weakest plants unviable.
• Moreover, the start-up of 200k b/d Yulong Petrochem plant will worsen China’s fuel surplus.
• These shutdowns are expected to cap crude imports into China.