China’s crude oil refineries saw a significant drop in output in July, producing 6.1% less fuel compared to the same month last year. This marks the fourth consecutive month of declining refinery output.
The daily processing rate for July averaged around 13.91 million barrels, the lowest since October 2022, according to data from the Chinese National Bureau of Statistics, as reported by Reuters. Over the first seven months of the year, the average daily processing rate was slightly higher at 14.37 million barrels, but this figure still represents a year-on-year decline of 1.2%.
In contrast, China’s domestic oil production increased by 3.4% in July, reaching 17.9 million tons, which is equivalent to about 4.22 million barrels per day.
July also saw a reduction in China’s crude oil imports, which fell to their lowest level since September 2022. This decline in imports occurred as refiners reduced their capacity utilization rates due to weaker fuel demand. According to China-based consultancy Oilchem, independent refiners—often referred to as “teapots”—operated at an average of 56.11% capacity in July, down 7.3% from the average for the same month last year.
Fuel demand in China has been impacted by the growing use of LNG-powered trucks, as well as increased reliance on alternatives to car travel, such as high-speed rail and air travel. Although gasoline demand has remained stable in recent months, the rise in electric vehicle (EV) and hybrid sales has also contributed to the decline in fuel demand. China led the world in EV sales last month, with a 31% increase in combined sales of battery-electric and hybrid cars.
In related economic developments, China’s factory output growth slowed in July, falling short of analysts’ expectations. While factory output still grew by 5.1%, it missed the forecast of 5.2%. This slowdown in manufacturing growth suggests potential negative implications for oil demand.
The latest data on China’s refinery and manufacturing output is expected to influence global oil prices, which have recently begun to recover after a dip earlier in the week due to geopolitical tensions in the Middle East.