China Caps Oil Spending

China’s oil output slump shows no signs of abating, as the country’s state-run energy giants hold back spending to cope with the crash in prices.

Led by PetroChina Co., China’s big three producers have spent only about half of their 2016 capital-expenditure targets in the first nine months of the year, according to operational data released by the companies, Bloomberg reported.

Their domestic crude output has slumped 6% over that period amid the cutbacks. China Petroleum & Chemical Corp., known as Sinopec, has seen the largest production declines and spent the least so far this year.

“Low crude prices led to lower spending and lower spending caused the lower output,” said Tian Miao, a Beijing-based analyst at North Square Blue Oak Ltd. “The only thing that can change the game is a substantial rebound in crude prices.”

While output drops, crude imports have surged to all-time highs as the country’s refineries are on track to process a record amount of crude this year and the government takes advantage of the slump in prices to fill emergency stockpiles.

China edged past the US last month as the world’s biggest importer and the country has relied on overseas supplies for 65% of its needs this year, a record ratio, according to analysts at consultant ICIS China.

“The Chinese government has no problem with reduced domestic crude production as long as crude imports can be guaranteed,” Tian said. “The national duty of the big three in a low-crude environment is more about securing imports than producing at a loss.”

China’s total crude output fell 6.1% in the first nine months of the year.