Top global refiner Sinopec to cut crude runs by over 10% on Mideast supply squeeze
- Sinopec to cut runs by 600,000 bpd–700,000 bpd
- Buys roughly 2.4 MMbpd of Middle East crude
- Sinopec prioritizes fuel over petchems
- Beijing takes steps to cushion against tightening oil supply
China's Sinopec, the world's biggest refiner by capacity, aims to cut throughput this month by more than 10% from its original plan in response to a crude supply gap caused by the war in the Middle East, two sources familiar with its operations said.
The cuts by state-owned Sinopec, which accounts for a third of China's refinery output, are part of Beijing's widening measures to curb oil supply disruptions due to Iran's blockage of the Strait of Hormuz, a conduit for 20% of the world's oil.
Throughput is likely to fall by 600,000 bpd–700,000 bpd on average in March, the two sources estimated, adding that the cuts exclude losses from plant maintenance planned before the Israel-U.S. war on Iran began on February 28.
A Sinopec representative said the company does not comment on operational matters.
Sinopec imports roughly 4 MMbpd of crude oil, of which 2.4 MMbpd come from the Middle East, including regular shipments under yearly contracts from Saudi Arabia, Kuwait, Iraq and Qatar.
China, the world's biggest oil importer, brought in 11.55 MMbpd last year, roughly half from the Middle East.
BEIJING TAKES MEASURES ON SUPPLY SQUEEZE. This week, Beijing ordered an immediate ban on exports of diesel, gasoline and aviation fuel to prioritize domestic supply. It also rejected Sinopec's request to tap a government-controlled oil reserve, media reported.
The planned cuts represent a decline of 11%–13% from an initial plan to process 5.2 MMbpd in March, one of the sources said.
"Sinopec has little option other than cutting runs, and immediately," said the second person.
In Asia, which buys 60% of its oil from the Middle East, refiners had already shut at least 1 MMbbl of capacity since the start of the war, media has reported.
Nearly 1.9 MMbpd of Gulf refining capacity has been shut due to the war, consultancy IIR said on Tuesday.
FUELS PRIORITIZED OVER PETCHEMS. In a further step to avert a shortage of domestic fuel, Sinopec will focus on maximizing fuel output at the expense of petrochemicals production, which garners weaker margins, four people familiar with the matter said.
Sinopec's run cuts include last week's shutdown of an 80,000-bpd crude unit at its Fujian Refining & Petrochemical Corp unit.
That facility also cut operations by 20%–30% at its 1.1-MMtpy steam cracker, two people said this week.
Separately, Sinopec's Zhenhai Refining and Chemical Corp also slashed operation rates at both of its steam crackers to around 70%–80% of their combined capacity of 2.2 MMtpy, one of the sources said.
On Monday, Sinopec-invested Fujian Gulei Petrochemical shut down its full complex, comprising a 1.1-MMtpy steam cracker, for maintenance through April, the company said in a notice.
Asia's naphtha market is grappling with a lack of supplies, as the region takes about 60% of the petrochemical feedstock from the Middle East, with steam crackers cutting runs and declaring force majeure since last week.
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