China has issued 9 million tons of export quotas for refined products, mostly to state-held giant refiners, cutting the allocations in the second batch this year compared to nearly 19 million tons worth of quotas in the first batch granted in early 2023.
The lower volumes come amid depressed refining margins in Asia and stronger margins domestically, analysts and trade sources told Reuters.
The export quotas, which also include 3 million tons of marine fuel, were issued mostly to large state refiners, with Sinopec, China National Petroleum Corporation (CNPC), China National Offshore Oil Company (CNOOC), and Sinochem Group receiving as much as 92% of all allocations, trade sources and consultancies JLC and Longzhong told Reuters.
The export quotas in the second batch were lower than the 18.99 million tons issued in early January in the first batch. Yet, the second batch of refined oil product quotas is double the 4.5 million tons issued in the second batch in June last year.
The reduction of the new quotas compared to the first batch earlier this year was widely expected, amid rising domestic demand and weakening margins outside China, a Reuters survey of state refiners and consultancies showed in April.
Following the generous first batch of export quotas early this year, Chinese authorities were expected to limit quotas in the second batch to between 8 million tons and 12 million tons, according to the survey. China was also expected to issue the new batch earlier than in June. Last year, the second batch of export quotas were announced in June.
The earlier allocations would help Chinese refiners to better plan for exports or domestic market sales during the peak driving season, according to the prevailing margins in China and the rest of Asia, analysts say.
"This year, quota holders have greater flexibility to prepare export plans and capture arbitrage opportunities," Energy Aspects analyst Sun Jianan told Reuters.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More