China’s biggest refiner is to cut its run rates from next month in response to sky-high tanker freight rates, according to reports.
Sinopec Corp will begin reducing its refining throughput from November, according to reports by Reuters and Bloomberg, both citing anonymous sources with knowledge of the matter.
Sinopec's total processing could be reduced by 1m tonnes of oil in December, equivalent to a 5% cut in refining output, a source told Bloomberg.
Asian refiners would otherwise be ramping up production to meet winter fuel demand, but rising freight rates for tankers are eating into refining margins.
"The cargoes have been purchased so it’s still unsure whether the volume, especially for long-haul cargoes, can be cut," an anonymous Sinopec source told Reuters.
"Freight rates have jumped to $8-$9 a barrel, up by $7 a barrel. It’s eaten up a chunk of the [refining] margins," he added.
Sinopec is considering drawing down crude inventories to manage its import demand, the source told Reuters.
A second source told Reuters that said Sinopec was still assessing how much import volume it could cut for December delivery and from which international suppliers.
“The cargoes have been purchased so it’s still unsure whether the volume, especially for long-haul cargoes, can be cut,” the source told the newswire.
VLCC earnings rose by 244.2% last week, suezmax earnings by 92.3% and aframax by 35.3%, according to Arctic Securities.
As TradeWinds reported earlier today, Dynacom has fixed its 300,000-dwt VLCC Folegandros 1 (built 2004) on subjects to Reliance Industries of India at Worldscale 330, equivalent to $272,807 per day.
Many analysts and owners have suggested the rally has been triggered by the removal of a large chunk of global fleet due to US sanctions on Iran and Venezuela; seasonal demand from refineries, and preparation for IMO 2020.
