Asian refiners are slashing their run rates and, in some instances shutting down amid worsening losses of oil product demand due to the coronavirus pandemic. The outbreak has spread to other Asian countries outside China, with Malaysia, Thailand, India, and Pakistan imposing national lockdowns, forcing regional refiners to reduce throughput and even invoke force majeure for oil imports.
Meanwhile, in China, there are some signs of oil demand improvement as the country reported fewer new cases of COVID-19. Global oil demand is expected to shrink by 4.5 million bpd this year as the pandemic cancels flights and forces people to stay at their homes. Demand in Asia is projected to fall by 3 million bpd in H1 2020 and then increase by 1 million bpd in H2 2020. Asia's refinery runs declined by 2.7 million bpd in Q1 2020 and is expected to decrease further in Q2 due to growing inventory pressure.
China's state refiners raised their utilization rates to around 70% in March, after hitting a record low of 67% in February. Sinopec's run rates increased from a record low of 64% in February to 72% last month and are expected to increase further in April. Meanwhile, Petrochina's run rates fell to 64% last month from 66% and 78% in February and January, respectively. Shandong independent refineries lifted their average runs to 52.1% on March 1-25, compared to February's average of 41.5%.
In India, state refiners IOCL lowered runs at most of its refineries by 25%-30%, but it adjusted operations to boost LPG production to meet the increased demand for cooking gas during the lockdown. BPCL began lowering runs by 30% at its Mumbai refinery on March 29, and is expected to maintain production at reduced rates for a week. HPCL reduced throughput by 10% at its Mumbai refinery and maintained normal operation at its Vizag refinery.
In Japan, at least two refiners are looking to cut throughout this month amid weak demand for gasoil and gasoline. Data from the Petroleum Association of Japan showed the country's crude throughput slipped 0.2% week-on-week to 2.81 million bpd on the week ended March 28. Approximately 497,000 bpd of Japan's refining capacity is scheduled to be under maintenance in April. This is equal to 14% of Japan's total installed capacity of 3.52 million bpd.
South Korean refiner SK Energy cut its crude throughput to 85% in March from 95% a year ago and is expected to lower throughput further this month. GS Caltex moved forward a maintenance schedule for crude distillation units. Hyundai Oilbank said it had lowered crude throughput to 90%. S-Oil said it monitored the market closely but had so far no plan to cut rates at its units.
