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Looking to take advantage of export demand and refining margins to offset weak domestic consumption, Chinese refiners could export a record-high volume of transportation fuels this month as they also seek to use up the export quotas allocated by the government.
Chinese exports of gasoline, diesel, and jet fuel could reach in December between 6.5 million tons to 7.1 million tons, according to oil research and consultancy firms and trading sources quoted by Reuters on Friday.
Diesel exports are expected to lead what could be a record volume of fuel exports, with an estimated 3 million tons of possible exports this month, according to analysts.
The current record for Chinese diesel exports – at 2.83 million tons – was in March 2020, just before the crash in global oil demand at the start of the pandemic.
Even with the U-turn in the Covid policy in China, domestic fuel demand is not expected to rebound immediately, market participants told Reuters.
So refiners, with enough quotas, will look to export more fuels in the coming weeks.
Despite lukewarm domestic demand, Chinese refiners are boosting production and exports to profit from high diesel margins in a very tight global market. The refiners now have the biggest batch of fuel export quotas issued for this year by authorities. China allocated 15 million tons of new fuel export quotas to its major refiners at the end of September, and the quota could be rolled over into early next year.
However, trading sources told Reuters that refiners had been recently encouraged to use up their respective quotas by the end of this year, which could lead to record fuel exports out of China, depressing Asian refining margins.
In November, China’s fuel exports hit the highest since April 2020, jumping by 37.7% from October and 46.4% from November 2021 to stand at 6.14 million tons last month, according to estimates by Reuters columnist Clyde Russell.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com