- To export 300,000 mt gasoil, 600,000 mt jet fuel
- 2-year high gasoline crack encourages export increase
China’s oil companies plan to further slash their exports of key oil products to a six-year low of 1.07 million mt in August due to limited export quota availability, reports Platts.
Additional cargo offering seems risky
The volume was 7% lower than the planned 1.15 million mt in late June for July and well below the monthly average volume of 4.38 million mt in the first half. It was last lower at 899,000 mt in February 2015, according to data from Platts and the General Administration of Customs.
“We have to skip gasoil exports in August as the second batch of quotas are not allocated yet,” said a source with a Shanghai-based Sinopec refinery, which has cut its July outflow of the product to 30,000 mt from the usual monthly level of 90,000 mt.
“It has been the time for oil companies to sell their August cargoes, but without new quotas, so risky to offer additional cargoes,” an oil product trader said.
Cargo volume to reduce oil outflow
Oil companies held only 3.21 million mt of oil product export quotas available for July onward until the new award, taking into account the first round quota allocations at 29.5 million mt for 2021 and exports at 26.29 million mt in January-June, Platts reported on July 19.
“Companies may sell more cargoes in August [than the current planned levels] once they are issued new quotas, but the volume will be limited as Beijing is set to reduce the country’s oil product outflow … oil companies have to save their quotas to grab the limited windows to make big money from overseas,” the trader added.
The exporting companies have been waiting for the second batch of quotas since June, and recently there were talks about the new allocation being released by end-July at around 9.5 million mt.
However, even with the 9.5 million mt in new quotas, the total allocation for 2021 of 39 million mt could remain 14.7% lower than the actual exports of 45.74 million in 2020, Platts data showed.
Beijing is set to cut the new quota allocation for the rest of the year to control emissions, Platts reported on June 1.
Gasoline volume up
With the limited quotas, Chinese oil companies decided to increase their gasoline outflow in August to 170,000 mt from the planned 30,000 mt in July to enjoy hefty profits.
The FOB Singapore 92 RON gasoline crack against front-month ICE Brent crude futures has averaged a two-year high of $8.51/b month-to-date as of July 22, up sharply from the $5.53/b average in June, Platts data showed, as US RBOB spikes while supplies from China slumped.
Moreover, domestic gasoline stocks have been rising as the leading gasoline exporter PetroChina has had to keep barrels at home as it has been using up its quota.
Inventories in Pearl Delta in southern China increased by about 18.5% week on week in the third week of the July, according to market sources.
Therefore, Sinochem, Zhejiang Petroleum & Chemical and Sinopec each plan to export 100,000 mt, 40,000 mt and 30,000 mt of gasoline in August, respectively.
Meanwhile, Chinese refiners plan to export 300,000 mt of gasoil and 600,000 mt of jet fuel in August, sources said, representing a 38.8% and 4.8% reduction on the month, respectively.
There are six export quota holders in China. They are state-owned Sinopec, PetroChina, CNOOC, Sinochem and Norinco, as well as the private refiner ZPC.
PetroChina’s predicament
The country’s dominant gasoline exporter PetroChina is likely to skip oil product exports in August, following its tiny outflows by trucks from its Yunnan Petrochemical in July, several refining sources with the company told Platts.
China sent about 1.6 million mt/month of gasoline to international market in January-June, with PetroChina supplying about 70% of it, according market sources.
However, the oil giant has almost used up its 9.81 million mt of quota, preventing it from offsetting the inventory pressure via exports.
Most PetroChina refineries are located in Northeast and Northwest China, which are relatively less developed compared with consumption centers in Southern and Eastern China.
Amid the low volume of exports in July, PetroChina has cut its refining utilization rate by about one percentage point from June.
China has been a net exporter for oil products, and the recent export control has been too abrupt for the exporting oil companies, which have little room to make a sudden adjustment on production and sales plans, sources said.
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Source: Platts
