One week ago we reported (for the second time) that one of the biggest mysteries for the global oil market, and certainly the biggest wildcard for future oil prices, is the current state of China’s Strategic Petroleum Reserve. As JPM reported , China’s SPR demand was equivalent to approximately 1mm bpd. More importantly, stopping shipments for the reserve would wipe out about 15 percent of the country’s imports. More to the point, according to JPM, and contrary to official data, China’s strategic oil reserve was approaching capacity, which going back to JPM’s June calculation, meant that “our base case assumes China continuing high volumes of (1mbd) SPR builds through August, while factoring in 7% domestic crude production decline and 2% refinery throughput increase. This means 15% mom decline in China’s crude imports in September, or 1.2mbd loss from the China inventory demand. China’s net oil imports ytd has expanded 16% yoy, versus a flat consumption growth.”
This has been cited as one of the reasons why China’s relentless demand for oil, which in early 2016 hit a record level of monthly import, has seen a modest decline in recent months.
However, it appears that the mystery over China’s SPR is no longer the main driver when it comes to the future of Chinese demand. According to Oilchem, a Shandong-based industry researcher, China’s major refineries cut runs to 70.3% of capacity as of September 1, down -1.43% from Aug. 18. To be sure, a big part of the utilization rates decline emerged as the Sinopec Qilu refinery with 8m ton/yr capacity, started maintenance. Oilchem expects the tuns to rebound in mid-Sept. as some plants will resume after works.
This post was published at Zero Hedge on Sep 6, 2016.
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