Oil Through the Looking Glass 10/6/20

The Glut is Back

Those of you who have been watching your crude ticker this morning will see many red numbers on the screen. The reason for this has been the switch of sentiment to concerns about oversupply. We have had reports late last night that the API have predicted a large build in US crude stuck levels – some 8.4 mil bbls. We will have confirmed later today (3.30pm UK time) from the EIA the actual statistics, but it doesn’t look too bullish from where we are currently standing.

 

Cuts to Chinese Refining Hub

Smaller refiners, known as teapot refiners, are to have their production cut at China’s Shandong oil hub, as it plans for a new giant complex. Refining will be cut by around half a million bpd as construction of a 400,000 bpd refinery and a 3 million tonne a year ethylene plant get the go ahead. The hope is that this new refinery will help produce more product for increasing economic activity, and also in itself help the recovery from the covi-19 crisis.

 

Asian Refineries Look to Ramp Up Production

China’s state and independent refiners saw a rise in their average operating rates towards the end of the second quarter and the higher rates are expected to persist. The higher operating rate of 71.27% for state refineries and of 76.12% for independent refineries in May would be maintained in June.

 

Indian Oil Corp, the country’s top refiner, could see the average operating rate of its plants reach 85% in June, up from 80% in May and 39% in April.

 

South Korean refiners had average operating rates of 76.4% in April down from 91.4% a year earlier, according to data from Korea National Oil Corp.

 

Japan’s refineries operated at only 51.8% of their capacity in the week ending on May 30, data from the Petroleum Association of Japan (PAJ) showed on Monday – the lowest levels since at least 2005.

These figures do show that much of Asia has refining capacity that it could increase to help dispel with the crude glut and coincide with the increasing demand from the opening up of lockdown economies.