China Crude Output Rise From 7-Year Low Seen as Blip Amid Slump
(Bloomberg) -- China’s crude production rebounded from the lowest in more than seven years after prices rallied on speculation OPEC would agree to curb output, a jump seen unable to overcome a longer-term slump. The country’s refineries processed a record amount of crude.
Production in November advanced 3.4 percent from the previous month to about 3.93 million barrels a day, the highest since July, according to Bloomberg calculations based on data from the National Bureau of Statistics released Tuesday. Output, which was down 9 percent from the same month last year, has fallen 6.9 percent in the first 11 months of 2016 to about 4 million barrels a day.
China’s output has declined this year as state-owned firms shut wells at mature fields that are too expensive to operate at current prices. The country needs oil above $50 a barrel to stabilize production, according to analysts at Sanford C. Bernstein, as well as Fu Chengyu, the former chairman of both Cnooc Ltd. and China Petroleum & Chemical Corp. Production is forecast to drop 335,000 barrels a day this year, followed by a further slide next year of 240,000 barrel a day, the International Energy Agency said Tuesday.
“November’s output pickup is probably just a blip, which won’t likely persist," said Gao Jian, an analyst with Shandong-based industry consultant SCI International. “For the next six months, unless oil prices stay above $50 a barrel, we we won’t see solid recovery.”
The rise in production last month was in anticipation of higher crude prices amid OPEC meetings, said Amy Sun, an analyst with Shanghai-based commodities researcher ICIS-China.
China’s oil refiners processed a record 11.18 million barrels a day last month. The country’s processors typically boost crude and fuel stockpiles beginning in November to meet demand from people heading to their hometowns for the Lunar New Year holiday, which will be celebrated from Jan. 27 to Feb. 2.
Brent crude prices rebounded in November on speculation the Organization of Petroleum Exporting Countries would agree to supply cuts outlined at a meeting in Algiers in September. The producer group said Nov. 30 it would cut production by 1.2 million barrels a day from January, the first reduction in eight years. Crude has advanced about 20 percent since then.
"It will take up to six months for domestic producers to ramp up output if oil price can stay above current levels,” said Li Yan, an analyst with oilchem.net, a Shandong-based industry researcher.
China’s annual crude output is seen falling to 200 million tons this year (about 4 million barrels a day), down roughly 7 percent from nearly 215 million tons last year, according to estimates from SCI International and ICIS-China.
With assistance from Sarah Chen, Jing Yang