China Unlikely to Repeat Last Winter's Surge of Fuel Exports

By Clyde Russell
Tuesday, November 21, 2023

A surge of diesel and gasoline exports from China in the last northern winter eased then-prevailing fuel shortages in Asia but a repeat performance this year is unlikely.

China's exports of refined products have eased from high levels in recent months, partly as a result of stronger domestic demand, but a lack of available quotas and shrinking profit margins for fuels have also played a role.

In the northern winter of 2022-23 China played an outsized role in easing a squeeze on the availability of refined fuels, caused largely by the loss of some shipments from Russia as Western countries sanctioned it over its invasion of Ukraine.

Diesel exports peaked at 2.39 million metric tons in January this year, before dropping to just 290,000 by June, according to official customs data.

However, the release of export quotas by Beijing coupled with high profit margins in Asia saw China's diesel shipments rebound with exports rising to 1.26 million metric tons in August.

Since then they have eased back, dropping to 1.18 million metric tons in September and 1.11 million in October.

November exports are expected to less than 700,000 metric tons, according to an estimate by LSEG based on ship-tracking and port data.

As of Nov. 19, LSEG had only assessed 250,000 metric tons of diesel exports from China in November, while Kpler was estimating about 2 million barrels, equivalent to 266,000 metric tons.

China's refiners have been struggling with weaker profit margins for fuel sold in the domestic market, and while regional margins are higher, many refiners are being constrained by a lack of quotas.

The profit margin, or crack, for a barrel of gasoil, the middle distillate that is the building block for diesel and jet kerosene, at a typical Singapore refinery, ended at $23.94 on Monday, up from the recent low of $20.46 on Nov. 10, but 42% below the $41.54 peak from last winter, reached on Dec. 16.

The weaker margins for diesel are a further constraint on China's exports, and the likelihood of a demand-led rally this winter is dissipating amid signs of ample supply in both Asia and Europe and concern over slowing global economic growth.

Gasoline shipments slump
It's a similar story for China's gasoline exports, with strength over the previous winter being replaced with current weakness.

China exported 770,000 metric tons of the light motor vehicle fuel in October, down from 1.09 million in September and about half of the peak of 1.49 million from last winter, in November 2022.

Shipments this month are likely to be around 600,000 metric tons, according to LSEG, which would be the weakest month this year.

The profit margin on making a barrel of gasoline from Brent crude in Singapore ended at $8.84 on Monday, down from the recent peak of $13.15 from Nov. 10, and less than half the high last winter of $18.32 from Jan. 26.

The weaker profits mean that for many Chinese refiners it becomes a marginal decision as to whether it makes more sense to trim processing rates, or to try to export surplus product, assuming the refiner still has quotas available.

The pattern in China's refined fuel exports since last winter show that it can act as a swing supplier of products, ramping up exports when margins surge, but pulling back when they decline.

However, the challenge for regional product markets is that China is not always a market-driven player, with its quota system for exports allowing authorities to either encourage or discourage exports according to their policy imperatives.


(Reuters - The opinions expressed here are those of the author, a columnist for Reuters. Editing by Robert Birsel)

Categories: Tankers Asia Cargo Liquid Bulk

Related Stories

Petronas Expands Suriname Portfolio with Deepwater Block Acquisition

Yinson Production, “K” LINE Target Europe's CCS with FSIU and LCO2 Solutions

MODEC and Terra Drone Renew FPSO Drone Inspection Partnership

Yinson Production Closes $1B Investment to Drive Further Growth

Chuditch Gas Field Drilling Ops Get Delayed to Next Year

BP Expands Oil and Gas Scope in Azerbaijan with New Projects and Exploration Rights

Azeri SOCAR Plans New Agreements with Oil and Gas Majors

China's Sinopec Laucnhes $690M Hydrogen Venture Capital Funds

CIP, ACEN Partner Up for First Large-Scale Offshore Wind Farm in Philippines

Velesto’s Jack-Up Rig Up for Drilling Job Offshore Vietnam

Current News

Petronas Expands Suriname Portfolio with Deepwater Block Acquisition

Japanese Oil and Gas Firm Enters Two Blocks off Malaysia

Yinson Production, “K” LINE Target Europe's CCS with FSIU and LCO2 Solutions

Woodside Agrees Long-Term LNG Supply with Petronas Unit

MODEC and Terra Drone Renew FPSO Drone Inspection Partnership

Yinson Production Closes $1B Investment to Drive Further Growth

Petronas-Eni Upstream Joint Venture to Take Up to Two Years to Set Up

Wood JV Gets EPC Job for Shell off Brunei

Chuditch Gas Field Drilling Ops Get Delayed to Next Year

French Oil Major Acquires Interests in Multiple Blocks in Southeast Asia

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com