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For the first time in more than a decade China actually became a net exporter of fuel oil, however it seems that that remarkable achievement will only last for a month.
According to Energy Aspects, in August, for the first time since 1999, China shipped out more fuel oil than it imported; but due to this month of limited buying domestic stocks began to dwindle and refiners in September were forced to increase imports, once again turning the country into a net importer.
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A fuel oil purchasing manager at a Chinese company said that “demand at this point and for the next few weeks will be slightly better than before as inventories are diminishing and will need to be replenished.”
China mostly uses fuel oil in its various small, independent refineries, which turn the hydrocarbon into more valuable products such as gasoil and gasoline.
This year China National Chemical Corp, the largest operator of small refineries in China, won a crude oil import quota of 200,000 barrels a day, reducing its demand for fuel oil, and therefore the demand on the fuel oil market.
China has also decided to open its crude oil import market to more refiners next year, offering even more import quotas, and therefore further reducing the demand of fuel oil.
As China’s demand for fuel oil falls, its main suppliers, Sinopec, PetroChina, BP, and Mercuria are likely to suffer in the region.
China was always relied upon as they largest importer of fuel oil in Asia, able to soak up all excess production from other nations in the region, but Amrita Sen, the chief oil analyst at Energy Aspects, explained that “China’s position as a big importer of fuel oil is no longer guaranteed.” Although he also suggested that it will still likely remain a net importer for some time as “even with increased refining capacity, China might not be ready structurally to become a net exporter. There could still be months when bunker demand is good.”
Despite the evidence that demand for fuel oil seems to be falling, Richard Gorry, the managing director at JBC Asia, believes that the increasing evidence of a rebound in China’s economy suggests that demdn will soon start to increase once more, and that “China will remain a net importer of fuel oil on an annual basis in years to come.”
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com