China cut crude production by the most in 15 years as producers shut higher cost fields.
The world’s second-largest oil consumer reduced oil output in May by 7.3 percent from a year ago to 16.87 million metric tons, according to data from National Bureau of Statistics released on Monday. That’s the biggest decline since Feb. 2001. Coal production fell by 15.5 percent, the most in data going back to April 2015, when the bureau resumed releasing those figures.
Lower domestic output reflects spending cuts by the country’s oil drillers amid low prices, Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Kong said in an e-mail. PetroChina Co., the nation’s biggest producer, said in March it expects oil and gas output to fall the first time in 17 years as it shuts fields that have “no hope” of turning a profit, while Cnooc Ltd. sees output slipping as much as 5.2 percent this year.
“Lower domestic oil production means that China will rely more and more on imports from Middle East and Russia,” Kwan said in the email. The slump in output “is worse than our forecast,” he said.
Coal demand in China has slid as its economy slows and shifts toward consumer-led growth, while the government seeks to cut industrial oversupply and curb pollution. Output declined to 263.75 million tons in May, according to the bureau.
The pullback by local miners is boosting prices, said Deng Shun, an analyst with ICIS China, said. Spot power-station coal at the port of Qinhuangdao, a domestic benchmark, rose for the second time in three weeks to an average 400 yuan a metric ton as of Sunday, the highest level since September, according to data from China Coal Transport and Distribution Association.