China’s Panjin Haoye Chemical Co Ltd’s entire oil refinery and petrochemical complex was shut down after a huge explosion killed five people and left eight missing on Sunday, Reuters has reported.
According to Chinese state television, the explosion occurred at 3:13 p.m. (0713 GMT) on Sunday while the plant was undergoing maintenance work at an alkylation facility. Xu Peng, has estimated that the Haoye facility was processing at 62.5% of its crude refining capacity of 130,000 barrels per day (bpd) through 2022. The plant processed ~110,000 bpd in December, according to another China-based trade source.
The explosion has come at a time when crude prices thanks to increasing demand in China following its latest re-opening. RBC energy strategist Michael Tran says the “Chinese consumption machine” appears to be ramping up after December crude imports totaled 10.9M bbl/day, up 830K bbl/day from the previous 11 months of 2022.
Meanwhile, China’s crude inventories are steadying but have fallen~30M barrels from the summer 2022 peak. Front-month Nymex crude for February delivery settled +8.2% to $79.86/bbl at the end of last week while March Brent crude closed +8.5% to $85.28/bbl, both posting their forth weekly gain in five weeks.
China’s economic reopening has been the primary driver for higher oil prices, with signs of easing inflation in the latest CPI data also adding to the optimism about the U.S. economy either heading for a mild recession or a soft landing. Hedge fund trader Pierre Andurand has told Bloomberg that global oil demand could soar as much as 4% in the coming year if the world manages to fully emerge from Covid restrictions. Andurand has said that oil demand may increase by 3 million to 4 million barrels a day in 2023 helped by a switch to oil from gas.