August 8, 2018 / 4:21 AM / 3 months ago

China crude imports rise, but capped by weak 'teapot' demand

BEIJING (Reuters) - China’s crude oil imports recovered slightly in July after falling for the previous two months, but were still among the lowest this year due to a drop-off in demand from the country’s smaller independent, or “teapot”, refineries.

FILE PHOTO: A labourer works at an oil refinery in Nanjing, capital of east China's Jiangsu province May 15, 2007. REUTERS/Sean Yong

Crude shipments came in at 36.02 million tonnes last month, or 8.48 million barrels per day, up from 8.18 million bpd a year ago, and just up on June’s 8.36 million bpd, data from the General Administration of Customs showed.

However, July imports were still the third lowest so far this year.

The slight pick-up likely reflected some teapot plants returning from maintenance, while refining margins also improved thanks to higher domestic fuel prices, said James Gao of consultancy China Sublime Information Group.

But overall, independent plants were under pressure from thinning margins since March following a new government tax regulation and near four-year high oil prices, with one plant having already declared bankruptcy.

Independent refiner Shandong Haiyou Petrochemical Group filed for bankruptcy in late July and its crude processing units have been shut indefinitely.

State-owned refineries, however, are maintaining robust refining margins as they dominate the retail market and also have fuel export quotas, and as competition from teapots is waning.

China’s largest refiner Sinopec Corp (0386.HK) is due to deliver its best quarterly result since 2013 later this month, thanks to robust refining business and rebound in oil prices.

Rival PetroChina expects its first-half profits to more than double from the year-ago period.

For the first seven months, China took in 260.83 million tonnes, or 8.98 million bpd of crude oil, up 5.6 percent from a year earlier.

China’s refined products exports last month were 4.57 million tonnes, nearly flat from a year earlier. Fuel imports rose 14 percent on year at 2.67 million tonnes.

Total natural gas imports - including pipeline gas and liquefied natural gas - rose to 7.38 million tonnes, up 28.3 percent from a year ago, customs said.

Companies have scaled back purchases of spot LNG cargoes in recent months as prices shot up, traders said.

Year-to-date gas imports grew 34.3 percent on year to 49.43 million tonnes.

Reporting by Meng Meng and Aizhu Chen; editing by Richard Pullin

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