Throughput at China's top oil refineries is set to edge lower this month as record high crude prices crimp margins, reviving worries of fuel shortages as the world's second-largest oil consumer heads into summer.
The country's 12 major plants, mostly on the eastern seaboard and making up over a third of China's refining capacity, will process 2.23 million barrels per day (bpd) crude in May, 1.7 per cent below April, a survey found.
While these state-run plants are well aware of their duty to keep domestic consumers sated, some were quietly limiting production to trim the heavy losses caused by $70 crude and tight domestic price caps, officials said.
"The more we process, the heavier the losses," said an official with Sinopec Guangzhou refinery.
Last August some gasoline and diesel pumps ran dry in parts of southern China after refiners -- wracked with billions in losses as Beijing resisted raising retail fuel prices – reduced runs and trimmed imports ahead of the peak summer demand season.
With robust construction and transport sectors, double-digit growth in air traffic, a the swelling number of family cars and near 10 per cent economic expansion, analysts say the cut-back in refinery rates threatens to leave the market short again – and could undermine estimates of demand growth.
"The market is definitely heading to the tighter side. There are chances that last summer's crunch may repeat, especially as the companies are so firmly avoiding imports," said Yan Kefeng of Cambridge Energy Research Associates.
China's apparent fuel consumption rose by six per cent in March, the fastest growth in six months, although some analysts said this was inflated by stockpiling by independent Chinese traders in anticipation for another increase in administered pump rates.
Beijing raised retail fuel prices by three per cent-five per cent in March, the first increase in eight months. Prices have risen by about 40 per cent -46 per cent since 2003, while crude prices have doubled.
Local media reported last week that petrol stations in the southweastern Fujian province were rationing diesel amid tightening supplies. Industry officials said some independent service stations were doing the same in the neighbouringGuangdong province.
Dominant refiner Sinopec and PetroChina have shied away from importing diesel since February as the imports are about 20 per cent more expensive than the domestic rates.
Despite the modest run cuts, output should rise in the coming months as refiners add several new units.
At least 400,000 bpd new primary crude refining capacity is being brought on stream this year, which would account for nearly seven per cent of the country's total, matching analysts' consensus demand growth forecast for the whole country.
PetroChina's Dalian refinery is already processing more crude thanks to the March startup of a new 200,000 bpd crude unit, while Sinopec's Guangzhou plant started running a new 160,000 bpd crude unit at end of April, though it has left May runs steady from March due to weak margins.
