Petrotahlil - Sinopec expects lower 2020 refining runs as coronavirus hits demand
Asia’s top refiner China Petroleum Chemical Corp, or Sinopec, expects its full-year 2020 refining runs will be lower than in 2019 because of a contraction in Chinese fuel demand caused by the coronavirus outbreak.
The fall in demand will last for the first half of this year and lead to lower full-year demand but refined oil consumption is expected to return to normal in the third and fourth quarters, said Ling Yiqing, vice president of Sinopec, during an earnings call on Monday.
“Due to the impact of the first and second quarters, our expectation of full year consumption of oil products will be negative growth,” said Ling.
“In terms of refining utilization rates in the full year 2020, due to the impact of coronavirus outbreak and exports, our whole year number will be affected,” he said.
State-backed Sinopec lowered the utilization rates at its crude oil refineries to 66% in February amid the outbreak, which was first detected in the central Chinese city of Wuhan and prompted the government to impose stringent travel bans.
The average utilization rate at Sinopec’s oil refineries was 91.3% in 2019.
Ling also said the spread of coronavirus overseas will impact oil product exports, negatively affecting Sinopec’s oil refining in the second quarter.
Inventory of refined oil products was seen at a high level in February at Sinopec, Ling said, but it is expected to fall back to a normal level by end-March.
The company, which will trim 2020 capital expenditure by 2.5%, was making a detailed plan to reduce capex and would report this in April during first-quarter earnings, said Zhang Yuqing, chairman of Sinopec, on Monday.
Zhang expects that oil prices will fluctuate around $42 per barrel, and the low price scenario might remain for a longer-than-expected period.
He added that coal-to-liquids (CTL) and coal chemical projects will not have any competitiveness when oil prices fall below $35 per barrel.
Sinopec, which has three coal-chemical projects, will strive to lower costs this year and work on future planning, Zhang said.
Asia’s largest oil refiner also warned about lower petrochemical output in the coming months as it expects a notable decline in global consumption in the next one to two months.
Sinopec, which had lowered operation rates by 10% at its petrochemical plants in February, has resumed operations to nearly 100%, but it still sees a high level of inventory of petrochemical products, Yu Baocai, a vice president at Sinopec, also told the Monday briefing.
Sinopec’s mainland-listed shares eased 0.7% by midday on Monday but its Hong Kong-listed shares were up around 2%.
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