SINGAPORE- China is slashing auto fuel imports in September after the Olympics as recent record purchases and high refinery runs filled domestic tanks to the brim, a Reuters poll showed on Friday.
Chinese state importers PetroChina and Sinopec Corp are likely to either halt or sharply cut diesel imports this month, having racked up all-time high volumes of just below a million tonnes in July. (see table below for details)
PetroChina skipped gasoline imports and instead booked 60,000 tonnes for term customer Pertamina in Indonesia, putting an end to its bumper petrol imports since May.
Including volumes from export-focused WEPEC, China's gasoline shipments abroad rose to 150,000 tonnes this month versus an estimated 90,000 tonnes in August. Sinopec bought just 90,000 tonnes of the auto fuel, down from China's overall gasoline imports of 210,000 tonnes last month.
China's return as a net gasoline exporter will further pressure the Asian market for the auto fuel that is already hit by weak demand, traders said.
"There is no question that gasoline and diesel imports will be reduced visibly in August and further reduced sharply in September. However, a complete halting of product imports in September is not likely," said U.S.-based independent analyst Paul Ting.
"The import reduction is due to high inventory and poor downstream margins," he added.
Reflecting bloated stockpiles, China's top 12 refineries, which account for more than a third of total capacity, trim crude processing rates in September to 2.41 million barrels per day (bpd), a recent Reuters survey showed.
The August crude runs of these refineries stood at 2.49 million bpd, near the record of 2.56 million bpd in June last year.
These refineries blamed the heavy inventories for the run cuts, which also forced the independent plants to keep operating at below half their capacity. These so-called teapot plants make up nearly one-fifth of China's total refining capacity.
"Wholesale prices of both gasoline and diesel have been falling, so there is no incentive for refineries to keep running at high rates when the market is oversupplied," said one fuel distributor in Guangdong, who declined to be named.
Wholesale diesel prices fell to 7,200 yuan ($1,052) a tonne from around 7,600 yuan ($1,111) a few weeks back.
On top of the high refining runs, demand for diesel and fuel oil is easing in line with China's slowing economic growth.
The country's manufacturing sector contracted in August, a survey of purchasing managers showed. The official purchasing managers' index stood at 48.4 in August, unchanged from July, the China Federation of Logistics and Purchasing said this week.
Those are the only two months that the survey has fallen below the boom-bust line of 50 since its public launch in 2005.
Petrol usage also weakened as Lehman Brothers said China's passenger car sales fell 10 percent in August from a year ago, due to the impact of the Olympics and weakening consumer confidence.
Lehman added in its report that auto sales in China, the world's second-largest car market, would remain lacklustre for the rest of this year and possibly into early 2009.
GLOOMY PRICES
The sharp drop in China's fuel buying partly led to global crude oil futures to close on Thursday at the lowest levels in five months below $108 a barrel, down from the record of $147.27 a barrel in mid-July.
Gas oil trading in Singapore has been in a steep contango of more than $2 a barrel, reflecting the bearish market since China halted purchases.
Imports of residual fuel into the world's second-biggest energy user are also falling. China will import half a million tonnes of fuel oil so far in September, against 934,241 tonnes shipped in last month, due to sluggish domestic demand.
The September imports are likely to be 502,500 tonnes and if the trade estimates hold in tandem with customs data, this will be a big fall from the 1.586 million tonnes imported in the same month last year.
The teapots usually process straight-run fuel oil into low-quality diesel for the porcelain and glass manufacturers in Shandong.
China is importing 445,000 tonnes of jet fuel this month, similar to last year's 459,000 tonnes due to abundant supplies.
The table below shows China's oil product flows (in 1,000 tonnes; refinery figures in million barrels per day) =============================================================
SEPT AUG JULY JUNE Diesel imports Nil 530 972 962 Diesel exports NA NA 34 35 Gasoline imports 90 210 606 283 Gasoline exports 150 90 188 154 Naphtha exports NA NA 106 131 Naphtha imports NA NA 79 39 Kerosene imports 445 430 610 569 Fuel oil imports 503 934 1,941 1,660 Top refinery runs* 2,410 2,490 2,510 2,380 Total refinery runs** NA NA 7,140 7,210 ============================================================= NOTE: Data for June and July are based on customs. Figures for August and September are from trade estimates. * Refinery processing rates of the top 12 refiners, as polled by Reuters. ** Refinery crude throughput as reported by the National Bureau of Statistics. ($1 = 6.84 yuan) (Editing by Ramthan Hussain)

(Reuters, Sep 5, 2008)