Low oil price triggers China’s US$40/bbl floor policy – what does it mean for refiners?

Since the breakup of the OPEC+ production cut agreement on 6 March, Crude oil prices have collapsed once again to below US$30/bbl. China’s US$40/bbl floor policy is back to the fore and the key question is how this policy will impact the refiners’ behaviour in China this time. Our analysis shows that this policy's impacts vary between China’s state-owned and private refiners. The private refiners will likely process more crude or feedstock to take advantage of improved margins resulting from this policy. But, the magnitude of increase just from this policy will be limited because of the high product inventory and overall weakness in oil demand. However, the behaviour of the state-owned refiners will be less affected by the policy, but we expect them to face more pressure with increased runs from the private refiners. Overall, the total country crude runs will still be limited by the recovery in oil demand and high product stocks.