China Jan-May refining sector loss swells almost 10 times to $2.6 billion

China's refineries recorded a net loss of Yuan 17 billion ($2.6 billion) in the first five months of this year, 9.5 times more than the year-ago period due to surging crude feedstock prices,

the country's top economic planning agency said.
"The refining industry turned from being profitable to making a loss, and the net loss in May was Yuan 3.1 billion, which led to lower crude throughput and output of refined products," the National Development and Reform Commission said in a report published Thursday on its website.
In late April, China National Petroleum Corp.'s listed arm, PetroChina, reported a loss of Yuan 6.13 billion from its refining business in the first three months of this year, while China Petrochemical Corp.'s, or Sinopec Group's, listed arm Sinopec Corp. recorded an operating loss of Yuan 576 million from its refining segment during the period.
While China has raised retail prices for refined oil products twice this year, they have not kept pace with the rapid rise in crude prices. State-owned enterprises have also had to ramp up production to make up for lost output from private refineries amid a directive from the government to ensure adequate supplies of oil products to avert a possible supply crunch similar to the diesel supply shortage that plagued the country in late 2010.
Lofty international crude prices earlier this year pressured margins and led Chinese private refineries, or teapot refineries as they are more commonly known as, to drop run rates to an average of 30% of capacity.
Between January and May, the cost of sales of Chinese refineries increased by 38.3% year on year, yet revenues rose by only 31.6%, thereby slashing earnings, the NDRC said.
According to the government, the petrochemical sector fared better in the first five months of the year, registering a net profit of Yuan 156.2 billion during the period, up 55.8% year on year.
Looking ahead, the NDRC said profit growth by the petroleum industry could trend lower, although the oil refining and tire manufacturing sectors could see a turnaround in their businesses.
Source: Platts