China’s Crude Oil, Coal Output Declines Deepen Amid Cutbacks

Updated on
  • Daily crude output in July falls to lowest since October 2011
  • Nation’s coal mining output drops 10% from January-July

China’s crude oil and coal production declines deepened as the nation’s oil companies cut spending amid low prices and coal miners slashed output to meet government-set targets.

Crude production last month in the world’s largest energy consumer dropped 8.1 percent to 16.7 million metric tons from a year ago, according to data from the National Bureau of Statistics on Friday. That’s about 3.95 million barrels a day, sliding to the lowest since October 2011. Output is down 5.1 percent during the first seven months of the year. Coal mining during that period slowed 10 percent to 1.9 billion tons.

Chinese oil majors are estimated to have cut capital spending by 10 percent in the first half of the year from the same period in 2015, resulting in a drop in domestic crude production, Sanford C. Bernstein & Co. analysts said in an Aug. 1 report. Meanwhile, coal output is contracting as President Xi Jinping’s government seeks to shut overcapacity and use cleaner fuels. Coal mining fell 13 percent to 270 million tons, the slowest year-on-year decline rate in three months and helping push up spot coal prices at the port of Qinhuangdao to the highest level in 16 months.

“Crude and coal production will post on-year drops throughout 2016 on cost concerns and government efforts to cut industrial overcapacity,” Tian Miao, an analyst with policy researcher North Square Blue Oak Ltd., said by phone before the data were released. “The decline rate of coal production may have narrowed last month with peak demand from the power sector in summer.”

Too Slow

Brent crude rallied almost 90 percent to a peak in June from its 12-year low in January, before sinking into a bear market. Prices are still about 60 percent below where they were two years ago. The nation’s refinery runs averaged 10.7 million barrels a day last month, slipping 2.7 percent from June’s record 11 million, while apparent oil demand fell to the lowest since October 2014. Natural gas output slipped 3.3 percent from the previous year to 10.3 billion cubic meters, Friday’s data show.

Authorities have cautioned that coal mines are shutting too slowly to meet year-end targets. Reductions during the first seven months of 2016 equaled about 95 million tons, or about 38 percent of this year’s goal, according to a statement this week by the National Development and Reform Commission, the country’s top planner. Six state-owned coal miners in Shanxi province, the largest coal-producing region, will shut down 21 mines this year, according to the 21st Century Business Herald.

— With assistance by Jing Yang

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