Crude Is Getting Slammed After China Headlines

WTI crude is suddenly tumbling. While it's unclear of the specific catalyst (storms outweighing most other events), desk chatter suggests it is due to a story in The FT that China is striving to reduce capacity of its 'teapot' oil refineries - thus cutting demand notably.

Beijing’s push to use crude import quotas and licences as a tool to spur consolidation within China’s independent refining sector is working to correct an industry that has grown “out of control”. A new report from Columbia University’s Center on Global Energy Policy argues the number of privately owned “teapot” refineries will shrink over the next decade as larger, sophisticated plants thrive at the expense of smaller rivals.

 

Consolidation comes as the industry faces pressures from overcapacity, a battle for market share between independent and state-owned companies and slower demand for refined products. Large plants with higher utilisation rates and greater access to imported crude had already begun acquiring smaller plants that had not been granted the same rights by Beijing.

 

“The government does not want dozens of refineries running at 40-50 per cent capacity,” said Erica Downs, the author of the report.

 

“Beijing is correcting a course for an industry that has gotten out of control.”

The reaction to this potential plunge in demand hit WTI immediately