China Jan-Feb refinery output up 3.3% on fuel policy, demand recovery

(Reuters) – Chinese refineries processed 3.3% more crude oil in the first two months of 2023 compared with a year earlier, data showed on Wednesday, spurred by fuel export policy and as independent refiners processed more in response to improving margins.

Recovering domestic demand for gasoline and aviation fuel as more people traveled following the scrapping of COVID-19 controls also supported refinery production.

Crude throughput in the January-February period reached 116.07 million tonnes, data from the National Bureau of Statistics showed, equivalent to 14.36 million barrels per day (bpd).

That compared with 13.98 million bpd the same period a year earlier and 14.1 million bpd in December.

The bureau combines data for January and February due to the Lunar New Year holiday, which fell in late January this year.

State-run refiners were encouraged to process more partly to capture profits in exporting refined products, following the government’s release of a larger set of quotas that has led to a 74% surge in refined oil product exports in the January-February period.

Independent plants also raised processing rates by 4.4 percentage points over a year earlier to an average of 67.5% of their capacity during the same period, according to the consultancy JLC.

Ample crude oil import quotas at the beginning of the year and expectations of recovering downstream demand supported the operational rates, JLC analysts said.

NBS data also showed China’s crude oil production in the January-February period grew 1.8% on the year to 34.17 million tonnes (about 4.23 million bpd) while that of natural gas rose 6.7% at 39.8 billion cubic meters.

Domestic crude oil production rose nearly 3% last year to stand firmly above the 4 million bpd mark after state producers accelerated developing geologically more challenging reservoirs to compensate for fast depleting mature basins.

Offshore oil and gas major CNOOC Ltd, which contributed 60% of the national oil output growth last year, set a target in January to raise output by 8% this year to a record.

(tonne = 7.3 barrels for crude oil)

(Reporting by China Commodities and Energy team; Editing by Robert Birsel)