Teapot Refiners Start Price War on Refined Products

Looks like Chinese crude inventory could be coming down amid a price war between the oil giants and teapot refiners.

iFeng: 罕见的成品油价格战 中石油和中石化这对巨头怎么了？

Oil products analyst Hu Huichun said to China News Network, resulting in the current price of melee situation, the main reason is more and more refining enterprises to obtain the right to use crude oil imports, making gasoline and diesel production increased significantly. At the same time, private refineries lose the right to export refined oil, resulting in oversupply, its refined oil inventories can only be digested in the country.

In the past, local refineries imported crude oil use rights and crude oil import rights are restricted, in order to use imported crude oil, subject to the oil, petrochemical and other large central enterprises. Beginning of last year, the state gradually release the relevant restrictions. As of March this year, the country a total of 18 local oil refining enterprises have been the right to import crude oil, began a large number of imported crude oil processing.

From the customs data released, China's crude oil imports rebounded sharply in May, the average daily imports of 37.2 million tons, becoming the world's largest oil importer. Another data show that last year the national refining refining capacity of the total capacity of about 30% of the total oil refining capacity.

China University of Petroleum Professor Dong Xiucheng that, compared to private enterprises, PetroChina Sinopec's organizational structure is complex, the gas station itself without adjustment of the right price, the market reflects the low sensitivity, can not be as private enterprises as the rapid adjustment of prices, the lack of price The advantages of attracting customer capacity correspondingly weakened, so its sales will be affected by private enterprises. Sinopec's quarterly report shows that retail sales fell to a three-year low in the first quarter of this year.

IHS Markit senior oil researcher Yan Kefeng also told Reuters, "teapot refinery" (referring to private refineries) overcapacity is eroding Sinopec, PetroChina two giants of the market share.

Faced with the impact of private refineries, PetroChina, Sinopec chose to join the price war. Dong Xiucheng that "two barrels of oil" through the price war, the market share to rise and the inventory can be effectively consumed, oil prices will return to normal prices.