MOSCOW (MRC) -- Higher fuel exports from China loom as the major threat to an otherwise fairly positive outlook for crude oil refiners across Asia, who have seen margins recover ahead of significant changes to the shipping industry, reported Reuters.
China has raised quotas for the export of refined products for 2019, allocating a third batch totalling 6 million tonnes, three traders told Reuters on Wednesday.
This brings the total allowed for the year so far to 48.15 million tonnes, up from 43 million tonnes for the same period last year. China allocates export quotas in batches throughout the year and has steadily been increasing these since 2015 when refining capacity started to exceed domestic demand.
There is no guarantee that all of the quotas will be used. But it’s worth noting that China’s exports of refined fuels were 32.52 million tonnes in the first half of the year, up 7.3% from the same period in 2018.
The quotas were granted to four state-owned companies including top refiner Sinopec, PetroChina, Sinochem Group and CNOOC Group.
Private refiners such as Hengli Petrochemical Co , which commissioned its 400,000 barrels per day (bpd) plant this year, didn’t receive quotas.
But it doesn’t really matter who gets the quota because if Hengli can’t export, it will sell into the domestic market and displace supplies from those refiners who are authorised to export.
This means the chances are that China will continue to export increasing volumes of gasoline, diesel and jet kerosene into Asian markets.
China customs figures show that diesel exports were 18.2% higher in the first half of 2019 compared with the same period a year earlier, coming in at about 496,000 bpd, while jet kerosene shipments jumped 21.9% to 364,000 bpd.
China’s gasoline exports were down 8.8% in the first half to about 318,000 bpd, but the new quotas granted make it likely that these will rise in the second half of this year.
This could put downward pressure on Asian refining margins, which have been recovering in recent weeks, with the profit from processing a barrel of crude in Singapore DUB-SIN-REF reaching USD9.37 in July, the highest in nearly two years. It has since fallen back to $6.09 a barrel, but this is still well above the USD1.52 low for the year, reached in late January.
MRC