E&P: strong demand across crude and gas, crude inventories see big draws    In Nov, China crude oil production fell by 2% yoy while apparent demand surgedto 7.5% yoy. For 11M17, crude production fell 4% yoy while apparent demandgrew 6% yoy. Despite the 9% mom gain in Brent for Nov, crude productioncontinued to be lackluster, with the balance coming from imports, up 13% yoy.Commercial crude inventories also witnessed the biggest draw in seven years,down 10% mom to 26.9mmt in Oct, reaching the lowest level since 2010. Naturalgas production grew only 2% for Nov while apparent demand registered 16%yoy growth. For 11M17, gas production grew 9% while apparent demand grew15%. The severe gas shortage led to a surge in imports, up 44% in Nov or 27%for 11M17, causing LNG price to exceed RMB10,000/t in many provinces orUSD29/mmbtu. Robust gas demand will likely persist throughout the winter withPetroChina, China BlueChem and Kunlun to benefit the most under DB coverage.    Refining and Marketing: teapots' run rate to record historical high GRM    China crude processing volume retreated from the historical high of 50.5mt inOct, but still recorded 49.4mmt in Nov, up 8% yoy. Refining spreads remainedhigh, with an average GRM of USD12.7/bbl in Nov, +USD1.19/bbl mom, andstood at USD11.93/bbl throughout the quarter to 18Dec vs. the seven-year highof USD11.98/bbl for 3Q17. Such high margins spurred refining activities acrossall major oil products. The output of gasoline/diesel/kerosene increased by 4%/6%/ 9% yoy in Oct, although stats in Nov are yet to be released. The run rate ofShandong teapots surged to 70.7% by 7Dec, reaching a new high since theirinception 3.5years ago and are closing in on the 74.1% by major refiners in China,based on data summarized by ICIS China. The utilization rate averaged 76.5% formajor refiners and 62.8% for Shandong teapots during this year to 7Dec. Thestrong product growth may put pressure on marketing spreads, of which retailgasoline #93has been flat mom, although wholesale diesel #0rebounded 20%mom to RMb345/t in Nov.    Chemicals: ethylene margin stable at USD809/t; China urea price surged    In Oct, the apparent demand for Chinese ethylene further increased 12% yoyto 1.8mmt, but the growth fell actually from 19%/15% in Sep/Aug. Since theHurricane Harvey influence started to phase out, the ethylene spread remainedstable at USD809/t in Dec. In olefin chain, the butadiene/PP/PE dropped by4.6%/3.7%/2.9% mom while propylene improved by 2.5% mom. In aromatics,the PS/benzene/ABS surged by 10%/8.3%/7% mom while SM dropped by 25.4%

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