Oversupply in China’s oil industry is outpacing even steel says Sinopec.
2014 will be a high point for oil refining in China, with an estimated 54.5m tons scheduled to be refined this year. According to Sinopec analyst Ke Xiaoming, the oversupply of refined oil flooding the markets could put it beyond even the steel industry.
Ke’s assertions, made at a recent refining summit, were supported by Sinopec Chairman Fu Chengyu, who also claimed that utilisation rates were around 67%.
Nonetheless, despite oversupply, China’s refiners have been turning last year’s losses into profitable enterprises, with Sinopec realising a profit of some 40bn yuan ($6.4bn) from its refining arm.
However, Ding Shaoheng - a bearish analyst - believes the market for refined products, including diesel and gas, has gone into an irreversible downward slump as construction slows and consumers demand more eco-friendly products. Ding believes the post 2017 diesel market will be worst affected, with a grim projection of negative growth within the next five years.