Sinopec seeks to refine less oil than planned in third quarter

A growing fuel glut that has hurt oil companies across Asia has now ensnared the world’s biggest processor.
China Petroleum & Chemical Corp, known as Sinopec, plans to process less crude into fuels during the third quarter as ample supplies continue to weigh on margins, according to people with knowledge of the matter.
While the cut in refinery throughput will be small when compared to overall production targets, it points to the challenging environment that processors face in light of increased competition, said the people.
Any move by Sinopec to reduce its quarterly crude runs will be the company’s first such decision this year, said the people who asked not to be identified as the information is private. While official processing targets are known within the company, these figures are only made public on a retroactive basis. A Beijing-based spokesman for Sinopec declined to comment.
From South Korea to Taiwan, refiners are cutting or considering reducing run rates as profits shrink, stoking concerns about global demand as supply swells. China’s independent refiners, known as teapots, have already been impacted by waning fuel consumption as the trade dispute between Beijing and Washington crimps economic growth, while new mega-refineries boost output and brought the country’s total crude refining to a new high.
“Sinopec could have been mulling the plan to reduce output a while ago, just when teapots were cutting runs across the board,” said Yuntao Liu, an analyst with Energy Aspects in London. The refiner “is big in scale” and it takes time for the company to make changes to its processing plans, Liu said.
The company’s shares in Hong Kong dropped as much as 1.5% in early trade yesterday and were unchanged at HK$5.2. Its stocks in Shanghai edged down 1.2% after the opening today before revising.
Sinopec, the world’s largest refiner by capacity, may reduce throughput by 3.6mn tonnes during the third quarter, Li Li, an analyst with ICIS-China in Guangzhou, said on Thursday. The industry consultant estimates Sinopec’s crude throughput at about 58mn tonnes in the July to September period.
The company refined 61.78mn tonnes of crude in the first quarter and plans to process a total of 246mn tons this year, up from 244mn in 2018, according to filings to the Shanghai Stock Exchange.
Impending ship fuel rules and weaker gasoline prices due to a surge in supply and a price war at Chinese retail filling stations has also prompted Sinopec to produce more diesel and less gasoline during the third quarter, said the people, who declined to elaborate on volumes.
Hengli Petrochemical Co’s new mega-refinery in Dalian has been running at full capacity and was offering gasoline at about 5,300 yuan ($770) a tonne after taxes in mid-June, 10% lower than its independent rivals in the region, according to consulting firm JLC.
Some retail stations were discounting gasoline in Hangzhou by as much as 25% and 92-RON gasoline was sold as low as about 5 yuan per litre, according to a June report from state television CCTV.
China’s daily refining rose to a record 13.12mn barrels a day last month as processors restarted units after peak maintenance and Hengli increased run rates in the new plant, according to Bloomberg calculations based on the official data.
Daily refining increased 7% from May to the highest level in data compiled since September 2012, the figures released yesterday showed.
Industry consultant SCI99 estimates that Sinopec processed 4.74mn barrels a day of crude in June, the lowest since March. Rival PetroChina Co, on the other hand, processed 3.11mn barrels a day last month, the lowest since August, its data showed.