Chinese oil companies are likely to slash their July gasoline, gasoil and jet fuel exports plan to a six-year low of 1.15 million mt amid tight export quota availability and better domestic margin, sources with knowledge about the matter told S&P Global Platts on June 29.
Moreover, outflows from China is likely to sustain at low levels in the rest of the year, constrasting to a monthly average of 4.31 million mt in the first five months.
The previous monthly low was 899,000 mt in February 2015, actual export data from General Administration of Customs showed.
The quota-holders plan to export 30,000 mt gasoline, 490,000 mt gasoil and 630,000 mt jet fuel in July, sources said, representing 98%, 68% and 29% month-on-month reduction, respectively.
Among the exporting companies, oil major PetroChina is likely to skip any oil product exports in July, according to sources.
It is rare in a decade phenomenon, as PetroChina’s Wepec has been China’s leading export-oriented refinery for a few years with about 330,000 mt of monthly outflow in January-May 2021.
“We don’t have any cargo to export in July,” a company source said.
In fact, some PetroChina refineries had already cut their June exports by 22% month on month due to quota shortages, Platts reported earlier.
Tight quota
Among the quota holders, PetroChina would use over 85% of its first batch of 9.81 million mt quotas in the first five months of 2021, while Sinopec, Sinochem, and CNOOC would use about 50% over the same period, according to Platts calculations.
Total key product exports in January-May stood at 21.57 million mt, leaving only 7.93 million mt of quota available for outflows for the rest of the year until the new quotas are allocated, Platts data showed.
“We expected the second round of quota to be allocated in June, but it looks unlikely to happen any time soon,” a Singapore-based trader with a state-owned Chinese company said.
Moreover, Beijing is likely to limit the new quota allocation for rest of the year to below 10 million mt, Platts reported earlier.
This set China’s export quota for 2021 to be capped at 40 million mt, comparing to 59.03 million mt of total allocation for 2020 with 45.74 million mt of actual exports in the year.
“It will be a long term trend to sustain low exports due to limited quota,” a source with a Guangdong-based Sinopec refinery said.
The Sinopec refinery have reduced its oil product exports to 34.400 mt in June and July from 133,000 mt in May.
Good domestic margin
Among the key products, gasoline exports saw the heaviest reduction in July, with Sinopec as the solo exporter planning to send merely 30,000 mt overseas.
The oil companies’ targeted volume for gasoline was 980,000 mt in June, compared to 1.55 million actual outflow in May.
This is a result of PetroChina’s absence in July, which has been the leading gasoline exporter in China by supplying about 70% of the country’s gasoline outflow to overseas and recently set Pakistan as its new outlet.
In addition, Chinese companies would like to enjoy higher margin to sell products in domestic market, refiners said.
CNOOC and Sinochem also import gasoline and gasoil cargoes in June and July. CNOOC made a profit of about $5.46/b from importing gasoline, Platts reported on June 28.
“We took more gasoline barrels than gasoil, as gasoline is stronger in the domestic market. The hot weather and summer holidays would boost the fuel consumption for air conditioners,” a source with Sinochem said.
The wholesale price for 10 ppm 92 RON gasoline was around Yuan 7,985/mt or $89.82/b before consumption tax, value added tax and fees on June 29 in
Guangdong province, the most active oil product trading region in China, according to a source with PetroChina.
The Mean of Platts Singapore 92 RON gasoline, the most liquid Asian gasoline benchmark in Asia, was assessed at $81.59/b on June 28.
Wholesale 10 ppm gasoil was offered at Yuan 6,388/mt or $87.58/b before the taxes and fees on June 28, the PetroChina source said, compared with MOPS assessment at $80.33/b on June 28.
Source: Platts