Some Chinese refineries will shut down in May and June for annual maintenance, which will cut China’s throughput by about 10 per cent and reduce global crude demand.  

At least six Chinese refineries are planning full annual maintenance shut down in Q2

A report by Reuters on Friday says the global demand for crude will likely dip in the coming months as a number of Chinese refineries shut down their operations for annual maintenance.

According to the report, the shutdowns will will cut nationwide refinery throughput by about 10 per cent after the refineries reported record runs in March.

At least six state-owned and private refiners will shut down in the second quarter of this year for at least 30 days.  Among the refiners closing is China’s largest, Sinopec’s Zhenhai unit.

The slowdown in refining activity in China could mean the lower exports of crude to China, which could ultimately undercut the recent price rally that boosted oil prices to over $75/barrel.

As well, imports may be impacted by a shutdown of one of the country’s major oil import hub, Huangdao, located in norther Shandong province.

“If Shandong prepares to shut down the Huangdao port, crude arrivals could start dropping starting in late May,” said Emma Li, senior analyst at Thomson Reuters Oil Research.

The six plants to be shuttered process about 1.09 million barrels per day (b/d) and amount to about 10 per cent of China’s average monthly crude runs, according to Reuters.

Compared to last year, Reuters reports the pace of outages due to maintenance is down from 1.26 million b/d.

A number of private, or teapot, refineries are also considering maintenance shutdowns in June and early July.  Normally, teapot refineries undertake their maintenance programs later in the summer, but this year, Port authorities may enforce measures to cut pollution during the Shanghai Cooperation Organization Summit in Qingdao this June.

According to Reuters, Beijing often adopts tighter pollution controls and curbs shipping traffic for such events to ensure clear skies.  As such, teapot refineries may undertake their maintenance programs early to avoid the potential pollution curbs.

The 13 private refineries that could shutdown for maintenance summer have a total capacity of 400,000 b/d.

“We are seeing a drop … for May crude cargoes from private refiners,” said Zhou Guoxia, a senior energy analyst at JLC.