A reduction in oil products exports from the world's second-largest refiner could help ease oversupply in gasoil markets, which has caused Asian refining margins to slump to a six-month low.
GRAPHIC - Asian Refining Margins
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The second batch of quotas for gasoline, gasoil and jet fuel exports could range between 8 million and 12 million tonnes, the survey of four state refining sources and three consultancies showed.
That figure would be down from the first batch of 18.99 million tonnes, although up almost three times on the year, at the high end of the range for estimates, Reuters data showed.
"Refineries will be granted around 10 million tonnes of new export quotas in coming weeks, as they could use over 80% of 2023 quotas by the end of April," said Energy Aspects analyst Sun Jianan.
The quotas are typically issued only to state refiners Sinopec, PetroChina, Sinochem, CNOOC, China National Aviation Fuel Co and privately-owned Zhejiang Petrochemical.
It is unclear when the commerce ministry will notify the companies of their volumes in the second batch of quotas, although the second batch of volumes was issued in June last year.
Chinese refiners are expected to focus more on domestic sales, as their margins have improved while prices for diesel in Asian markets have dropped, traders said.
Domestic diesel prices are 270 yuan ($39.19) a tonne higher than export prices, a source at a state refinery said, which discourages exports.
Refiners are building stocks ahead of peak refinery maintenance later in second quarter in preparation for improving demand in the third quarter during summer, traders added.
With the economy improving mostly through domestic consumption activities this year, China's government will be less pressured to rely on oil product exports to boost economic growth, Sun said.
QUOTA USAGE
China's exports of the three key products are likely to stay elevated in April at about 3 million tonnes, according to a Reuters tally of estimates from consultancies and trade sources.
April export volumes Gasoil Gasoline Jet fuel Total
('000 tonnes)
Refinitiv 800 1100 1050 2950
Longzhong 484 730 1050 2264
Wood Mackenzie 926 1125 955 3006
Trade sources 650-700 700 1000 2350-2400
In the first quarter, exports of these fuels totalled 12.88 million tonnes, or about 68% of the first batch of quotas, Reuters calculations show.
Below are the export quotas issued in 2022-2023:
First batch 2023 18.99 million tonnes
Fifth batch 2022 13.25 million tonnes
Fourth batch 2022 1.5 million tonnes
Third batch 2022 5 million tonnes
Second batch 2022 4.5 million tonnes
First batch 2022 13 million tonnes
($1=6.8903 Chinese yuan renminbi)
(Reporting by Trixie Yap and Andrew Hayley; Additional reporting by Chen Aizhu; Editing by Florence Tan and Clarence Fernandez)
By Trixie Yap and Andrew Hayley
