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China's diesel, petrol buying spree set to end
China's state-owned oil companies are likely to stop imports of refined products such as diesel and petrol next month after a nine-month buying spree that has left stockpiles overflowing, one of Asia's largest refiners said.
"Since China started whipping up imports in November last year, 25 per cent to a third of our diesel exports have gone there," said Wilfred Wang, chairman of Taiwan's Formosa Petrochemical (FPCC). "But this market will disappear next month."
His remarks confirmed market expectations of an imminent end to a buying binge from Sinopec and Petro-China that has supported refining margins in the region but has been suspected of being out of line with end demand.
Since late last year, the two Chinese state-owned refiners had been importing increasing amounts of diesel, peaking at 960,000 tonnes in June, and the country be-came a net petrol importer for the first time in May.
Industry experts have attributed the buying binge to political orders to refiners to avoid shortages during the Olympics. The import wave had been boosted by tax rebates granted to Sinopec and PetroChina for imports of refined products.
However, much of the imported petrol and diesel has been stockpiled rather than consumed.
"The state refiners' stockpiles are so full that they have been reselling the stuff," FPCC said.
Mr Wang said this was one of many non-economic factors in the oil price.
The end of China's import boom, along with additional capacity from India's Reliance later this year, is expected to exacerbate a drop in refining margins across Asia.
The benchmark Singapore refining margin reached an average $9.92 per barrel in the first half of this year, 20 per cent above last year's, partly driven by the Chinese buying, but the full-year average margin would slide back to last year's level, the FPCC said. That would mean the Singapore refining margin could drop well below $6 per barrel in the second half.
"The highs in the refining margin are higher than last year's, but the lows will be lower," Mr Wang said. * Sinopec suffered a 77 per cent fall in first-half net profit as soaring crude prices and caps on state-set fuel prices pushed its refining business into the red. In spite of subsidies, Asia's largest refiner reported a net profit of Rmb8.26bn ($1.2bn) versus a slightly revised profit of Rmb36.4bn the previous year, Reuters reported.
"Since China started whipping up imports in November last year, 25 per cent to a third of our diesel exports have gone there," said Wilfred Wang, chairman of Taiwan's Formosa Petrochemical (FPCC). "But this market will disappear next month."
His remarks confirmed market expectations of an imminent end to a buying binge from Sinopec and Petro-China that has supported refining margins in the region but has been suspected of being out of line with end demand.
Since late last year, the two Chinese state-owned refiners had been importing increasing amounts of diesel, peaking at 960,000 tonnes in June, and the country be-came a net petrol importer for the first time in May.
Industry experts have attributed the buying binge to political orders to refiners to avoid shortages during the Olympics. The import wave had been boosted by tax rebates granted to Sinopec and PetroChina for imports of refined products.
However, much of the imported petrol and diesel has been stockpiled rather than consumed.
"The state refiners' stockpiles are so full that they have been reselling the stuff," FPCC said.
Mr Wang said this was one of many non-economic factors in the oil price.
The end of China's import boom, along with additional capacity from India's Reliance later this year, is expected to exacerbate a drop in refining margins across Asia.
The benchmark Singapore refining margin reached an average $9.92 per barrel in the first half of this year, 20 per cent above last year's, partly driven by the Chinese buying, but the full-year average margin would slide back to last year's level, the FPCC said. That would mean the Singapore refining margin could drop well below $6 per barrel in the second half.
"The highs in the refining margin are higher than last year's, but the lows will be lower," Mr Wang said. * Sinopec suffered a 77 per cent fall in first-half net profit as soaring crude prices and caps on state-set fuel prices pushed its refining business into the red. In spite of subsidies, Asia's largest refiner reported a net profit of Rmb8.26bn ($1.2bn) versus a slightly revised profit of Rmb36.4bn the previous year, Reuters reported.
