Global oil demand could soon pick up pace after the world’s top crude oil importer, China, issued its biggest fuel export quotas to its refiners for this year.
Chinese authorities have allocated 15 million tons of new fuel export quotas to its major refiners, and the quota could be rolled over into early next year, Bloomberg reported on Friday, citing industry consultancy group JLC.
The fresh batch of fuel export quotas was widely expected, in a move seen as an attempt from China to revive its economic activity, which has suffered from snap COVID lockdowns and a real estate crisis since the spring.
The new fuel export quota takes the combined full-year 2022 quotas to 37.25 million tons, per JLC estimates. This is in line with the 2021 full-year fuel export allocations of 37.61 million tons.
China has also issued a small amount of crude oil import quotas to its independent refiners, the so-called teapots, in the Shandong province, according to JLC.
China started this year by considerably reducing the allowances for fuel exports in the first export quota batch for 2022, signaling its intention to limit fuel sales abroad and curb excessive refinery output.
But the latest fuel export allowances signal that China will seek to revive its economy, giving refiners more quotas to export fuels and potentially lifting refinery run rates.
The new export allowances are bullish for the Chinese and global oil demand, as well as for oil prices, which have suffered in the past quarter from intensifying fears of recession and a possible hit to oil demand.
Earlier this week, Chinese industry officials said that China’s oil demand was set for recovery after the end of the COVID restrictions.
On the other hand, more exports of fuels from China could alleviate the product market globally ahead of the EU embargo on imports by sea of Russian crude and refined products. However, refining margins in Asia would be dragged down, as evidenced in today’s slump in the benchmark profit margin by $2 per barrel, as estimated by Bloomberg.
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.