- China plans to allocate 6M-10M tons of new fuel export quotas.
- Rising tax costs push gasoline and gasoil export losses higher.
- Chinese refiners may prioritize local sales over exports.
Beijing is expected to release a new batch of export quotas for clean oil products and low-sulfur fuel oil (LSFO) as early as March 2025. The anticipated volume of these quotas ranges between 6 million to 10 million metric tons, according to Platts.
New Export Quotas Expected
China is preparing to release a new batch of export quotas for clean oil products and low-sulfur fuel oil (LSFO) in March 2025. The expected quota volume is estimated to be between 6 million and 10 million metric tons. Industry analysts suggest that these allocations aim to balance domestic supply and stimulate economic activity.
Challenges in Export Profitability
Despite the new quotas, market response is likely to be lukewarm. The Chinese government reduced the value-added tax (VAT) rebate on clean oil product exports in December 2024, adding an extra $3-$4 per barrel in costs. As a result, export losses have increased:
- Gasoline: Export losses widened to $5.85 per barrel in March, up from $2.56 per barrel in February.
- Gasoil: Losses deepened to $3.64 per barrel, compared to $0.35 per barrel in February.
Refiners Favor Domestic Market
State-owned refiners, such as Sinopec, indicate that domestic sales currently offer better margins than exports. This suggests that even with new quotas, refiners may choose to prioritize domestic supply unless export profitability improves.
Global Impact and Future Outlook
China’s decision to issue new export quotas comes amid fluctuating global fuel demand. The reduced tax incentives could limit the actual export volume, affecting global supply dynamics. Industry experts will closely monitor how these policies shape China’s export strategies in the coming months.
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Source: Platts
