May 20, 2015
Beijing has cut the pace at which it is allowing Chinese refiners to ship out oil products this year by more than 40 per cent in its second quarter review of annual export volumes, traders familiar with China's oil markets said on Wednesday.
China controls oil product exports through quotas to state-run refiners after assessing domestic needs.
Sinopec Corp, CNOOC Ltd and China National Petroleum Corp (CNPC) were given an additional oil product export quota of 5.6 million tonnes for the year, down from the 9.75 million tonnes initially awarded for the year in the first quarter.
The state refiners could not be reached for official comment on the matter.
The refiners can usually apply for more allowances once initial quotas are used up. The quotas are typically given every quarter after a review of domestic supply and demand balances.
The drop in the volumes issued this quarter are likely due to expectations of lower operating rates, high domestic prices and high inventory, traders said. "Stronger domestic gasoline prices, which had tripled in the last two months, and a cut in refining capacities could have prompted the quotas to be revised down," said one of the traders.
Through April, Chinese refineries have been running at near-record levels of around 10.5 million barrels per day (bpd), according to data from the National Bureau of Statistics (NBS), but traders are expecting a heavy refinery maintenance season this month.
The largest drop in the quarterly quota issue was in gasoline, with the allowance cut by nearly half to 1.4 million tonnes from an initial 2.7 million tonnes, traders said.
The additional jet fuel export volume quota was cut to nearly 3 million tonnes, from a first-quarter quota issue of 5.6 million tonnes, they said.
Gasoil posted the least reduction of about 7 percent to 1.26 million tonnes added in the second round.
Chinese refiners are expected to boost diesel exports in May, with shipments climbing to over 500,000 tonnes, as the refiners try to utilise unused portions of the quota from the first round.
China's reduction of the second-round gasoline export volume quota could support Asian gasoline margins, which rose to a 10-month high on May 12. GL92-SIN-CRK Fewer gasoline cargoes from China, a key gasoline exporter of the motor fuel, will hit main buyers Singapore, Vietnam and Asia's top gasoline importer Indonesia hard.
These buyers would have to compete for gasoline cargoes from elsewhere at a time when India was scooping up cargoes in a rare move to plug a domestic supply shortfall caused by refinery maintenance.
Source: Business Times