The country had ratcheted up crude imports as well as refining rates to an all-time high in July, which is said to have left state-owned refiners Sinopec and PetroChina with swollen refined product inventories in the face of lackluster demand.
"August seems to have brought a reality check for refiners in China," said Vandana Hari, Asia news director at Platts. "Domestic fuel demand has clearly been lagging their high processing rates, and storage space is finite. However, the correction could be short-lived because the government's new domestic oil pricing policy implemented since the start of this year incentivizes high refining volumes. As long as inventories can be managed by boosting product exports and reducing imports, refinery throughput might remain high."
Refined product stockpiles held by Sinopec and PetroChina at the end of July were some 30% higher than the corresponding period of 2008 and had crept up 7% from a month ago, Chinese media reported earlier. At the same time, July oil products sales in China fell about 6% from a year ago and shrank 10% from June.
Refiners responded by cutting collective crude throughput in August by 1.7% from July to 32.56 million metric tons or 7.7 million barrels per day - the first monthly reduction since February 2009. Crude imports were cut by 5.9% from July to 18.48 million metric tons or 4.38 million barrels per day in August.
Chinese companies also slashed August refined product imports by 28% from July and boosted exports of their own output by nearly 10%, which sent net products imports plunging to 460,000 metric tons, a level not seen in many years.
Apart from rising oil inventories and declining demand, a Yuan 220-per-metric-ton ($32.2/metric ton) reduction in the government-controlled domestic products prices at the end of July is also said to have curbed refiners' appetite to process crude.
