The resumption of refined fuel exports from one of Asia’s largest exporters follows the interim peace deal between the US and Iran and is expected to ease transportation fuel prices in the region, where consumers have been grappling with inflation since Beijing curbed shipments in March to secure domestic supplies.
It may also encourage state refiners to increase output to capitalise on strong export margins, supporting a rebound in oil shipments to China, the world’s largest crude oil importer.
Zhejiang Petrochemical Co, majority owned by Rongsheng Petrochemical (002493.SZ), has been permitted to export fuel in July, four sources familiar with the matter said, after halting exports for more than three months.
China’s Ministry of Commerce and the National Development Reform Commission did not immediately respond to faxed requests for comment. Rongsheng also did not immediately respond to a request for comment. The sources declined to be named because they were not authorised to speak to the media.
Over the past few months, only state-owned companies were permitted to export gasoline, diesel and jet fuel and they were required to apply for volumes on a monthly basis.
Refiners are planning to export roughly 3 million metric tonnes of the three fuels this month, including bonded volumes to Hong Kong and Macau, according to two other sources. That is broadly in line with last year’s average export volume. However, the scheduling of these cargoes is still underway and is expected to be finalised by the end of this week, they added.
Exports were initially expected to reach nearly 2 million metric tonnes in July, Reuters reported earlier.
It remains unclear whether the lifting of export curbs will continue in August, two of the sources said.
The interim US-Iran deal had already prompted a surge in Middle Eastern oil exports, putting downward pressure on global prices and easing supply concerns. However, this week’s attacks have once again unsettled markets, pushing prices higher.
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LUCRATIVE EXPORT MARGINS
For July, China’s gasoline exports could rise to more than 400,000 metric tonnes, one of the two sources said, up from slightly below 40,000 metric tonnes in a preliminary plan.
Meanwhile, diesel exports could reach 600,000–700,000 metric tonnes, up from around 200,000 metric tonnes previously, while jet fuel exports may increase to roughly 1.9 million metric tonnes from 1.5 million metric tonnes, the second source said.
Export margins for Chinese refiners remained attractive, hovering at around 1,000 yuan per tonne (US$147.10) or more this week, according to two other trade sources.
Refiners will likely seek to utilise their remaining export quotas once the restrictions are eased, FGE NexantECA analysts said in a report. They added that gasoline exports are expected to see greater upside than diesel later this year as domestic demand comes under increasing pressure from the rapid adoption of electric vehicles.
($1 = 6.7980 Chinese yuan)