China’s Top Refiners Offer Bullish Outlook in Boost to Oil

By Bloomberg

Sep 28, 2022

image is BloomburgMedia_RIWE3EDWRGG001_28-09-2022_06-11-27_637999200000000000.jpg

LUOCHUAN COUTY, CHINA - MAY 25: An employee works at the Yanlian Oil Refinery May 25, 2005 in Luochuan County, Shaanxi Province, China. About 50 percent of China's oil and natural gas supply will be imported by 2020 due to the growing gap between domestic demand and production, according to the Xinhua news agency. As China's domestic production of oil has failed to keep up with booming economic growth and demand from the auto market, the country has been trying to gain access to foreign supplies of oil and natural gas, the report said. China produced 175 million tons of crude oil last year. (Photo by Andrew Wong/Getty Images)

(Bloomberg) -- Some of China’s biggest refiners have flagged an improving economic outlook for the world’s biggest crude importer, a bullish signal for an oil market that’s faltering on global slowdown concerns.

The economy is expected to be “much better” during the final three months of the year, compared with the third quarter, according to Wu Qiunan, the chief economist at PetroChina International. Some high frequency data may start to show better consumption in October, he said during a panel discussion at the annual Asia Pacific Petroleum Conference in Singapore.

China’s Covid Zero policy, which relies on lockdowns and mass testing to stamp out infections, has weighed heavily on the nation’s economy. That’s contributed to bearish headwinds for oil prices, which have tumbled around 30% since early June as concerns over a global slowdown take their toll on commodities.

The economic slump in China has passed and government stimulus has helped to boost confidence for consumers, according to Xin Sun, director at Shenghong Petrochemical International. Oil processing rates are improving and strong gasoline consumption will lead the recovery in transport fuel demand, said Chen Hongbing, deputy general manager at Rongsheng Petrochemical.

“We’re seeing green shoots in the Chinese economy,” Chen said on day three of the event hosted by S&P Global Commodity Insights. “I do believe that next year we’re going to see much more robust growth.”

Operating rates at China’s refineries are expected to increase to more than 80% of capacity on average in the fourth quarter, compared with 75% currently, Chen said. Any gradual easing of China’s Covid Zero policy will drive a recovery in oil consumption, led by motor fuel demand, he added.

(Updates with Rongsheng executive comment in fifth paragraph.)

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By Alfred Cang, Sharon Cho , Elizabeth Low