China's Oil-refining Giants to Cut Output

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Last updated at: (Beijing Time) Tuesday, June 18, 2002

China's Oil-refining Giants to Cut Output

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China's refined-oil product output rose slightly in the first five months of this year on strong demand, but the two biggest domestic producers plan to cut production rates in an attempt to bolster the sluggish price, analysts said.

China processed 89.2 million tons of crude oil January through May, up 1.9 per cent from the same period in 2001, the State Statistical Bureau said Monday.

May crude runs totalled 19.3 million tons, up 1.4 per cent from the year-ago period, it said.

The production of diesel rose by 5.4 per cent, while gasoline production fell 3.8 per cent. Diesel and gasoline are major refined oil products.

The processing hike was mainly attributed to strong economic growth and sliding domestic stocks, said Gong Jingshuan, a consultant to the China National Petroleum Corp (CNPC), the nation's second largest oil refinery.

"Production controls set by the two refining giants have paid off, with the their gasoline and diesel inventory cut to 9 million tons in May, down from over 10 million tons early this year," said Gong.

In previous months Sinopec and CNPC, who together control 90 per cent of the nation's refined-oil production, have joined hands to reduce processing of crude oil in response to the market glut.

Partly due to weak market demand and falling sales prices, Sinopec's net profit plummeted 86 per cent in the first quarter, compared to the same period a year ago.

Gong said the market is awash now with diesel and gasoline. Inventories built up to 10 million tons by late May.

"Demand has grown weak since the fishing ban in April," he added.

On April 1, the Chinese Government's annual ban on fishing in the Yangtze River began, cutting diesel consumption by fishing vessels.

To stimulate the market again, the two agreed to cut processing by 1.25 million tons to stabilize prices. PetroChina will slice 650,000 tons.

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