China cuts second batch of 2023 fuel export quotas
(Reuters) - China has decreased its second batch of export quota volumes for refined oil products, consultancies and trader sources said on Thursday, focusing on local demand during the refinery overhaul season and boosting domestic sales amid poor export margins.
The export volumes, comprising 9 million tons of refined products and 3 million tons of marine fuel, were allotted primarily to state-owned refiners, according to two refining sources and consultancies Longzhong and JLC.
China Petrochemical Corp (Sinopec), China National Petroleum Corp, China National Offshore Oil Company and Sinochem Group were the main recipients of these quotas, taking around 92% of the total allocation.
Reuters has asked the four companies for comment.
In addition, private refiner Zhejiang Petrochemical Corp, a refinery subsidiary of state defense conglomerate Norinco and China National Aviation Fuel Company were assigned 1.01 million tons.
China's Ministry of Commerce did not immediately respond to a faxed request for comment.
The quota was less than the first batch of 18.99 million tons in early January but double the allocation of 4.5 million tons issued around a year earlier, Reuters records show.
The smaller export quota comes as refiners stockpile products amid strong demand expectations for gasoline and diesel in the peak summer season.
China's gasoline and diesel export volumes have fallen for three consecutive months as refiners kept more cargoes for the domestic market where they are earning better profit margins, despite overall slow domestic demand growth.
While refiners have been unwilling to export because of the stronger local margins, the year-on-year increase in quotas mean that they can still choose to export should domestic demand turn weak at some point in time.
Longzhong estimated refiners could lose about 482 yuan ($69.73) a ton on gasoline exports and 734 yuan a ton on diesel exports in the current market.
"This year, quota holders have greater flexibility to prepare export plans and capture arbitrage opportunities," said Energy Aspects analyst Sun Jianan.
The 3 million tons of low-sulfur fuel export quotas in this second batch was down from 8 million tons in the first batch for this year.
However a trader from a state-owned Chinese oil company said the previous batch of low-sulfur fuel quotas had yet to be used up as marine bunkering demand was weak in the first quarter.
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