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China issued the first batch of oil product export quotas for 2020 and they are 53 percent higher than this year’s, Reuters reports.
At 28 million tons, the oil product export quotas will likely deepen an already serious glut of oil products on Asian markets that have eaten into refiner’s bottom lines.
The quotas were issued to five state oil companies, including PetroChina, Sinopec, CNOOC, Sinochem, and China National Aviation Corp. It will be up to each of the companies to decide which fuels make what portion of their total quota, unlike in previous years.
Most of the total quota, some 24.55 million tons, falls in the category of general trade. Exporters get tax refunds for exports made in this category.
Chinese refineries have been processing oil at record rates for most of this year, thanks in no small part to the addition of new refining capacity by independent companies, the so-called teapots. Bloomberg reported in March that this year will see total additions of almost 900,000 bpd in refining capacity, which will continue to drive demand.
There has been mounting concern among refiners in other Asian countries during most of this year that surplus fuel production in China would spill into neighboring countries, undermining the profit margins of local refiners. It seems it is not a concern that China itself shares. This year Beijing issued higher oil product export quotas than in 2018, too, although the increase was not as substantial as the one in the first batch of 2020 quotas.
The news should be good for crude oil exporters, however. Last month, China’s increased oil demand drove a spike in exports from the Middle East and a consequent spike in prices for the local crude blends. A 53-perxent increase in fuel export quotas will undoubtedly drive higher imports as well, as China, like its neighbor India, sources most of the oil it processes at home, from abroad.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.