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IEA: Crude Runs Up in China, Leading to Product Import Declines

Posted on: Sunday, 28 August 2005, 03:01 CDT

Apparent oil demand in China dropped about 2.8% below prior year levels in April as refiners in the country upped crude runs, reducing net product imports while increasing crude imports, according to the International Energy Agency (IEA).

China's refiners increased refinery output by approximately 9- 10% this April, according to the IEAs latest Monthly oil Market Report. To compensate for the increase in crude runs, crude imports in China are reported to have risen some 23% during the month, IEA said. Both increases were counteracted by a 620,000 b/d drop in net product imports, which the agency said led to an overall decline in apparent demand.

Explaining the drop in apparent demand, IEA said a domestic pricing policy "which discourages product imports and encourages exports into the higher-priced international market"-China's government limits increases in the price of several key products, including diesel fuel, for example-has done just that and also "limited the incentive of the small 'teapot' refineries to refined relatively high-priced fuel oil imports."

Additionally, power prices have been set at a level the agency said discourages the use of fuel oil for power generation and that some utilities "have gone into what they call officially call 'maintenance' rather than incurring a loss by importing fuel oil to generate power."

But despite the overall year-onyear decrease in China's apparent demand, IEA said stronger growth may re-emerge in the third quarter if the government aligns domestic diesel prices with those on the international market, among other measures.

Copyright Hart Energy Publishing, LP Jul 2005

Source: World Refining

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