China taps deeper into oil inventories despite biggest drop in refining on record
China's June crude throughput posted its sharpest year-on-year drop in more than two decades, with official data implying a crude inventory draw of nearly 1 MMbpd, as the Iran war tightened supply and high prices curbed demand.
China, the world's biggest energy importer, slashed imports by 41% in June, freeing up more oil for other countries to buy during the crisis.
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With its vast EV fleet, China is running on a leaner oil diet. But its ability to make such steep import cuts has also relied partly on drawing down reserves, with data suggesting it drew 85% more crude from its stocks in June than in May.
Beijing does not publish information about its reserves, but calculations, by adding official crude imports to domestic output then subtracting refinery throughput, estimate a drawdown of 940,000 barrels per day in June, up from 487,000 bpd in May.
Official data showed refinery throughput in June fell 17.7% from a year earlier to 51.24 million metric tons, or about 12.47 MMbpd, which was the lowest since March 2020, during the COVID pandemic.
The throughput drop has deepened every month since the Iran war began, with June throughput posting the sharpest year-on-year decline since at least March 2000, when the National Bureau of Statistics started publishing continuous monthly data.
Crude units at Chinese refineries ran at 58% of capacity in June, down 13% from last year, as Beijing eased production mandates in the face of high crude costs that have hurt refiners' profitability, Chinese consultancy Oilchem said.
The run rate was close to a 10-year low as a result of weak domestic demand and fuel export curbs, said Vortexa analyst Emma Li.
Throughput in the first half of the year dropped 4.9% from a year ago to 343.87 million tons, or 13.87 MMbpd, according to the data.
China's June domestic crude oil production fell 0.5% year-on-year to 18.12 million tons, according to official data.
In the first six months, oil output was 109.43 million tons, up 0.9% from a year earlier.
Natural gas production rose 1.1% year-on-year in June to 21.4 billion cubic meters (bcm). Output for the year to date was 133.0 bcm, up 1.6%.
(1 metric ton = 7.3 barrels for crude oil conversion)
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