China’s Biggest Oil Refinery
According to one expert, China’s largest oil refiner is curtailing operations as Beijing’s vigorous reaction to the delta virus lowers road and aviation fuel demand. According to Jean Zou, state-owned China Petroleum & Chemical Corp, or Sinopec (NYSE: SHI), is cutting operating rates at multiple units by 5% to 10% this month compared to previously anticipated levels. The analytics firm monitors refinery operations, maintenance schedules, and processing margins in China. When approached, a Beijing-based official from Sinopec’s press office declined to respond.
Millions of Chinese are cancelling vacation plans and hunkering down as the government implements mobility restrictions to hinder the re-emergence of Covid-19 as the world’s largest oil importer.
Despite having a higher immunization rate than the United States, Beijing is taking a stringent control policy, requiring a rethink of the global petroleum demand outlook. According to Wang Lining, a researcher, certain Chinese refineries cut run speeds last week as Covid-19 limits applied.
Fuel demand
Fuel consumption has expected to have dropped 30% from July 20 to August 6 compared to early July, according to JLC, a local consultant, in a note released Friday. It expects to have a considerable influence on consumption for the rest of the month.
Beijing’s stringent Covid-19 eradication campaign may also stifle economic growth and energy demand in the long run. While the strategy would create a relatively safe domestic environment, it will most certainly be costly for growth, according to Zhang Zhiwei, the chief economist at Pinpoint Asset Management.
According to data from aviation specialist OAG, Chinese airlines’ number of tickets sold fell by 32% in a week. Road traffic has decreased in all Chinese cities where Covid-19 cases have increased. According to BloombergNEF, traffic in the towns hit by the outbreak has dropped to 70% of normal levels on average.
Steel price
MetalMiner’s analysis of domestic Chinese steel pricing this week shows a decline in prices across all domestic markets and steel shapes. China remains a significant supplier to the rest of the globe, with shipments increasing by more than 30 per cent year on year in the first half of this year. Suppose this tonnage continues to displace supply from domestic mills in the rest of the world. In that case, it may free up some cargo for a highly constricted US market suffering from extended mill backlogs and predicted high pricing for the remainder of the year.
Because it relies on coal, the steel industry accounts for around 15% of China’s total carbon emissions; therefore, if China is to meet its promises for peak emissions by 2030, it will need to reduce output or implement a large switch to EAF from blast furnace technology.
