China's crude oil output dropped to the lowest in more than six years as the country's state-run energy giants continued to pump less from aging, high-cost fields.
(Bloomberg) -- China’s crude oil output dropped to the lowest in more than six years as the country’s state-run energy giants continued to pump less from aging, high-cost fields.
Production during August in the world’s largest energy consumer dropped 9.9 percent from a year ago to 16.45 million tons, according to data from the National Bureau of Statistics on Tuesday. That’s about 3.89 million barrels a day, the lowest since December 2009, according to Bloomberg calculations. Output is down 5.7 percent during the first eight months of the year.
"As crude prices fluctuate at a relatively lower level, there is no incentive for China’s high-cost producers to raise output any time soon," Tian Miao, an analyst with policy researcher North Square Blue Oak Ltd., said by phone before the data were released. Production will continue to decline through the rest of the year, Tian said.
Output from China, which was the world’s fifth-biggest producer last year, has been sliding as state-run companies shut fields too expensive to operate after prices fell earlier this year to the lowest since 2003. The country is forecast to lead production declines across Asia, helping tighten the global market as the world’s largest-consuming region relies more on overseas supplies. China's imports rebounded last month to the highest since April.
"The global oil market rebalancing is progressing," said Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Kong. "Massive capital expenditure cuts have translated to more oil supply destruction."
The country's biggest producer, PetroChina Co. cut its 2016 domestic crude output target to 103 million tons (about 2.06 million barrels a day), a drop of about 6 percent from the previous year, as it shuts some high-cost fields. Production from China Chemical & Petroleum Corp., known as Sinopec, is on track to shrink by a similar amount to about 763,000 barrels a day, company forecasts show.
"China’s crude output won't see an apparent rebound unless Brent recovers to $60 a barrel level, as most of China’s aging oilfields can't make a profit below this price," Tian said. Brent crude, the global benchmark, has lost about half it's value in the past two years. Prices have averaged almost $43 a barrel this year, compared with $99 in 2014.
While coal production in August rose 3 percent from the previous month to 278.09 million metric tons, production was down 11 percent from the same period last year, according to the statistics bureau. Coal mining in the first eight months slowed 10.2 percent to 2.18 billion tons.
To contact Bloomberg News staff for this story: Sarah Chen in Beijing at email@example.com ;Aibing Guo in Hong Kong at firstname.lastname@example.org To contact the editors responsible for this story: Pratish Narayanan at email@example.com Alpana Sarma, Ramsey Al-Rikabi
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