Fitch Ratings predicts that industry-wide refining and marketing margins in China will remain under pressure over 2H24, driven by slowing demand and modest increases in refinery capacity. National oil companies should be more resilient than teapot refineries due to stronger vertical integration.

China’s crude oil processing throughput decreased in 1H24, with the spread between crude prices and oil products narrowing on weakening demand. We expect oil product demand to stay weak in 2H24. Monthly consumption of refined oil products fell yoy from April to July 2024, with diesel experiencing the largest drop. Meanwhile, gasoline demand is peaking as electric-vehicle sales outpace combustion-engine vehicle sales, while kerosene consumption is slowing after the release of most pent-up demand.

We expect China’s refinery capacity to approach 1,000 million tonnes per annum (mtpa) by end-2024, from 950mtpa at end-2023, on the completion of major expansion and greenfield capacity.

China’s natural gas consumption growth should remain at a strong 7.0% in 2024, following a 9.7% yoy rise in 1H24, supported by higher city-gas usage and the transition from coal-fired to gas-based power plants. Domestic supply and natural gas imports both rose by double digits in 1H24, although higher international liquefied natural gas (LNG) spot prices could temper growth in spot LNG imports in the latter half of the year.
Source: Fitch Ratings