China's Major Oil Producers Continue Record-Setting Output Cuts
China’s crude oil output fell 9.8% in September from a year earlier in the second-biggest year-on-year decline on record, government data showed, with major producers continuing to shut high-cost wells to rein in spending.
Domestic crude output dropped to 15.98 million tonnes, or 3.89 million barrels per day (bpd), near the lowest in six years on a daily basis, National Bureau of Statistics data showed on Wednesday, reflecting both spending cuts at oil fields and the closure of old wells.
The sharp decline, following a record 9.9% drop in August, is the latest sign that a prolonged efficiency drive by drillers in one of the world’s top five producers may help to rebalance the oversupplied global market.
“Overall, low oil (prices) offer a good excuse or reason for Chinese firms to finally shut down those high-cost fields, which were previously operating with little concern over cost,” said Tee Sengyick of consultancy SIA Energy.
Daqing, China’s largest oilfield by output and one of its oldest, as well as Shengli in the eastern province of Shandong, are considered some of the nation’s most inefficient fields and have drawn the most scrutiny among producers in their output cuts.
Those curbs have come as international oil prices have stabilized amid hopes that OPEC members will agree output cuts. Prices are hovering around $52 a barrel after recovering strongly so far this year, but are still down more than 50% since mid-2014 and upstream companies are still struggling to make a profit.
China National Petroleum Corp’s (CNPC) president Wang Yilin earlier this month promised to adjust the company’s crude output plan to reduce “inefficient output” in the fourth quarter, the company’s official newspaper reported.
Sinopec Oilfield Services Corp, a listed unit of CNPC’s upstream business, has forecast a nine-month net loss of 8.9 billion yuan ($1.3 billion) due to low prices and weakness in the sector.
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This low production partly contributed to record high imports in September, with the robust intake seen extending to year-end as domestic output falls and strategic reserve storage capacity is expanded at newly opened sites.
China processed 43.8 million tonnes of crude, or 10.658 million (bpd), in September, up 2.4% on a year earlier, the government data showed on Wednesday. In the first nine months, crude oil throughput rose 2.1% from a year ago to 399.93 million tonnes, or 10.655 million bpd.
China’s natural gas production for September rose 0.1% from a year earlier to 10.2 billion cubic meters.