China Prompts Oil Price Crash

The marked shift in oil sentiment recently has been to a great deal prompted by a widespread concern of Chinese demand peaking this or next year as LNG displaces diesel in long-haul trucking, EV sales overtaking conventional cars since July and rail expansion eating into jet fuel recovery.

Chinese refinery runs have been declining for five straight months, with the National Bureau of Statistics reporting throughput rates at 13.91 million b/d in August amidst a widespread decline in Shandong teapot runs, as low as 55% last month. 

Meanwhile, Asian refiners’ margins slumped to the lowest seasonal levels since 2020 as high inventories of diesel and gasoline become an increasingly worrying factor as peak summer demand tapers off.

China’s clampdown on tax evasion is aggravating the pressure on refiners after a Shandong court ruled two refiners run by state-owned firm Sinochem, the Huaxing and Zhenghe plants totalling 220,000 b/d in capacity, fully bankrupt.