China Diesel Shortage May Double If Mideast Tensions Flare
February 10, 2012, 12:09 AM ESTBy Bloomberg News
(Updates with researcher’s comments in fourth paragraph.)
Feb. 9 (Bloomberg) -- China’s diesel shortage this year may reach 3 million metric tons if military conflict in Iran and Syria pushes crude costs to $200 a barrel, according to China National Petroleum Corp., the nation’s biggest energy producer.
That’s more than double a forecast 1.27 million ton gap under “normal” refinery operations with average oil prices falling in 2012 versus last year, CNPC said in its annual report on the oil and gas industry released today. China is expected to have 2.55 million tons of surplus gasoline in 2012, according to the report.
Chinese refineries have to sell fuel at state-regulated prices and often face pressure on profit margins when crude costs increase. Oil at $200 a barrel will force plants to cut utilization rates and lead to fuel shortages, CNPC said.
“China has made plans in case something happens with Iran,” Dai Jiaquan, a deputy director at CNPC’s Research Institute of Economics & Technology, which prepared the report, told reporters in Beijing. “Our leaders were in the Middle East recently and I’m sure they spoke about oil,” he told Bloomberg News, declining to give further details.
Chinese Premier Wen Jiabao visited Saudi Arabia, the United Arab Emirates and Qatar from Jan. 14 to Jan. 19.
Minimal Supply
China may have a gasoline oversupply of as much as 4.5 million tons if Europe’s debt crisis worsens, according to data in another market scenario in the CNPC report.
The nation’s apparent crude demand, or domestic production plus net imports, may rise 5 percent to 493 million tons in 2012, while apparent oil-product demand may rise 6.4 percent to 278 million tons, the parent of PetroChina Co. said. Gasoline consumption may increase 7.5 percent to 82.2 million tons, while diesel use may gain 6 percent to 176.7 million, it said.
“Most of the new refining capacity additions in China will start in the second half or even the end of the year, so the impact of those on supply will be minimal,” Dai said at the conference to mark the report’s launch. “There will be diesel shortages, especially during peak seasonal demand in the second and third quarter.”
China may process 470 million tons of crude in 2012, 5.4 percent more than last year, as it adds 38.2 million tons a year of refining capacity to bring the total to 578 million, CNPC said. China’s oil-refining capacity may climb to 700 million tons a year by 2015, it said.
The country will finish building the second phase of its emergency oil storage this year, CNPC said. The second phase consists of eight sites, according to the state-owned company.
Global Demand
The world’s refining capacity may rise 120 million tons in 2012, with capacity growth mostly in the Asia-Pacific and the Middle East, according to the report.
Global oil demand may rise by 1 million barrels a day this year, with the growth coming from non-OECD nations, according to CNPC. World oil supply may increase 1.5 million, it said.
Oil prices this year are expected to be lower than in 2011, with West Texas Intermediate to average $90 to $100 a barrel and Brent crude at $95 to $105, CNPC said. The WTI-Brent spread is expected to narrow in 2012, it said.
International spending on oil and gas exploration and production may rise 10 percent to a record $598 billion, after climbing 12 percent last year, it said.
--Chua Baizhen, with assistance from Jing Yang in Shanghai. Editor: Paul Gordon, Mike Anderson.
To contact Bloomberg News staff for this story: Chua Baizhen in Beijing at bchua14@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
