China’s exports of refined oil products could start 2023 with a drop of 40 per cent in January from December’s figure, as Lunar New Year travel demand boosts domestic consumption of transport fuels, Reuters said, quoting trading sources and analysts.
The fall in exports from China, which has the world’s second-largest refining capacity after the United States, was expected to underpin Asian refiners’ margins for transport fuels.
China ramped up fuel exports in the fourth quarter of 2022 after Beijing reversed its policy to focus on economic revival from reining in refinery emissions.
On Friday, China reported its December refined fuel exports, which also include marine fuel oil, at 7.7 million tonnes, the highest since April 2020 and up a quarter from November, although 2022 annual exports remained 11 per cent below 2021.
Estimates for January exports of diesel, gasoline and jet fuel are between 3.8 million and 4.1 million tonnes, said Chinese consultancies Longzhong, JLC, and several trade sources.
The volume of gasoline, at up to 840,000 tonnes, is likely to be the lowest among the products, they said.
“Wholesaler and retail prices, especially for gasoline, have increased since the start of the year,” said one trading source based in China, speaking on condition of anonymity.
The price hike, which came as local traders and distributors stocked up in expectation of strong driving demand during the holiday season, narrowed export margins, the source added.
Gasoline margins (GL92-SIN-CRK) have recovered close to $10 a barrel, the highest since August, on expectations of lower Chinese exports, traders said.
Exports of jet fuel were pegged at up to 1.2 million tonnes in January, down from up to 1.9 million tonnes in December, as aviation fuel demand picks up in China, according to data collated by Longzhong, JLC and two China-based trade sources.
Diesel exports are seen falling to between 1.7 million and 2.1 million tonnes, analysts added.
Chinese oil majors continue to capitalise on strong overseas margins for 10 ppm gasoil (GO10SGCKMc1) on low demand from the local construction sector during winter, one northeast Asian refiner said.
Two analysts at trading firms expect Chinese exports to fall further in February, as state majors keep up a focus on meeting domestic demand, especially for gasoline and jet fuel.
China may reduce quotas in the second half of 2023 if domestic demand improves and its policy turns back to focus on energy transition, said senior analyst Emma Li at Vortexa.
This followed a sizable issuance of 13.25 million tonnes in September, as the government sought to shore up the economy by encouraging refiners to step up operations and benefit from robust export profits.
