China exported 4.54 million tons of diesel in the first two months of the year, up 10 times from last year's export rate, which stood at 420,000 tons, government data cited by Bloomberg showed.
The increase was attributed to weaker domestic demand and export quotas that refiners had to use but strong demand from Europe must have also played a role in the surge of exports as the EU imposed an embargo on Russian fuels in early February and had to find alternative suppliers promptly.
Right now, in addition to the embargo, Europe has been hit by a strike at French refineries and LNG import terminals, which has further compromised the security of its fuel supply. Four out of six refineries in France have either already halted operations or about to do so.
According to the Bloomberg report, Chinese fuel exports are about to decline sharply this month because of the expected rebound in domestic demand, per chemicals distributor OilChem. In addition to stronger domestic demand, refineries entering regular maintenance will also tighten the supply of fuels coming out of China.
China is seen as the biggest contributor to global oil demand growth both by the International Energy Agency and OPEC. Both said in their latest market forecasts that the biggest portion of new demand for oil this year will come from the Asian hothouse.
Interestingly, despite the surge in fuel exports and higher crude oil imports, China managed to set aside a certain portion of that crude in inventory, Reuters' Clyde Russell reported earlier today. Some 270,000 bpd were added to both strategic and commercial oil inventories in China over the first two months of the year.
This was a major slowdown from December rates of inventory additions, which averaged 1.19 million bpd, with the average inventory addition rate for full-2022 at 740,000 bpd. This suggests that forecasts of a strong rebound in Chinese crude oil demand had a sound basis in reality.
By Charles Kennedy for Oilprice.com
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