China is set to further expand its massive oil refining capacity this year, offe...
SINGAPORE/BEIJING - China is set to further expand its massive oil refining capacity this year, offering support to global oil prices, and U.S. producers in particular, but its plans spell more gloom for Asia’s hard-hit refining industry.
Domestic demand, however, has failed to keep pace. Chinese exports of diesel, gasoline and jet fuel combined jumped 20% in 2019, reaching as far as Mexico, Nigeria and Italy, and weighing on global refining margins. Analysts expect aviation fuel and gasoline to lead China’s export growth this year due to bulging supplies and slackening domestic consumption, with the coronavirus outbreak adding to concerns, pinching refining profits at regional exporters such as South Korea and Singapore.
China imports around 80% of its oil needs, and crude imports are estimated to rise by 400,000-480,000 bpd in 2020, according to FGE’s Chen and Seng-Yick Tee, senior director of SIA Energy. This is down from 882,000 bpd last year, according to China customs data. Last month’s Phase 1 pact means China needs to boost buying of U.S. oil, which is mainly light and of low-sulfur, but as the new plants are geared toward processing medium high-sulfur grades, importers will have to find a balance between their refining needs and Beijing’s imperatives.
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