According to official data from China’s National Bureau of Statistics (NBS), the country’s refinery output fell 3.7% in June from a year earlier, marking the third consecutive month of decline. Refiners processed 58.32 million metric tons of crude oil in June, equivalent to 14.19 million barrels per day (bpd), the lowest level so far this year.
The subdued production reflects the broadly sluggish economic recovery and refiners’ narrowing processing profits, analysts and traders have said. While a few state-run refiners have resumed operations after planned overhauls, operational levels at smaller independent processors in the eastern refining hub of Shandong province dipped further in late June to 50.92% of their capacity, the lowest since at least the start of 2023 and down from 61.08% a year earlier, according to estimates by Chinese consultancy Oilchem.
“Smaller plants are really struggling with very weak margins, as demand, especially diesel, is falling behind expectations,” said a Shandong-based crude oil trading manager with an independent refiner. During January and May, Chinese gasoline demand dropped nearly 2% on the year, with diesel down 14%, according to commodities consultancy Sublime China Information.
China’s economy grew much slower than expected in the second quarter, as a protracted property downturn and job insecurity squeezed domestic demand. Both industrial output and retail sales slowed in June.
In contrast, China’s crude oil production in June rose 2.4% from a year earlier to 17.95 million tons, or about 4.37 million bpd, the highest daily volume since June 2015. Year-to-date crude oil output expanded 1.9% on the year to 107.05 million tons, or 4.29 million bpd, as national oil companies ramp up domestic production from offshore fields and deeper onshore reservoirs to boost supply security.
Natural gas production also jumped 9.6% last month from a year earlier to 20.2 billion cubic metres (bcm), and first-half output this year rose 6% to 123.6 bcm.