BEIJING – China’s top refiner Sinopec Corp will cut crude throughput by close to 236,000 barrels per day in July versus an earlier target, curbing production for the second straight month as inventories bulged and margins hurt, industry and trading sources said.
The cut would represent 5 percent of the 4.5 million bpd throughput target the refiner set in March for 2012.
Taking into account a planned overhaul at the Sinopec Wuhan refinery, the reduction would total about 303,000 bpd.
Sinopec will also lift less crude oil from Saudi Arabia and Kuwait against their contract volumes for its July loading programs, sources said, but declined to give an estimate.
The refiner takes in over 80 percent of China’s total Saudi crude imports, which have averaged 1.1 million bpd in the first five months of the year.
The July throughput cut, however, is slightly smaller than the reductions the refiner made in June and will put the average daily processing rate on par with June, sources said, without giving a specific rate.
"Sales were still quite bad after the June cuts, diesel in particular," said a Sinopec official involved in fuel sales.
"It looks like the economy is slowing more than expected... global oil prices have been sliding, that means China’s domestic fuel prices would fall in tandem so nobody wants to process more on higher-cost crude oil," said a crude oil trader.
The cuts on Saudi and Kuwaiti lifting were also due to a narrowing spread between benchmark Brent and Dubai crudes DUB-EFS-1M, which made the Mideast types relatively more costly.
Sinopec’s trading arm Unipec was also seen in the market reselling June and July west African crudes, traders have said.
Demand in the world’s second-largest fuel consumer started to take a hit from April as China’s industrial activities slowed, hurting in particular demand for diesel and naphtha, a key feedstock for petrochemicals. – Agencies