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China’s Quotas For Refined Oil Exports Surge 130% In 2018

Guangzhou (JLC), October 26, 2018--China has issued the third batch of quotas for this year’s general-trade refined oil exports and has boosted the total quotas for 2018 by 131 percent, the Ministry of Commerce announced.

The ministry set the third-batch of quotas at 2.93 million mt, and all the three batches of quotas for 2018 have come to 38.15 million mt. The quotas for gasoline exports amounted to 12.3 million mt, a surge of 148 percent year on year, while the quotas for diesel grew by 90 percent to 17.36 million mt and those for jet fuel soared by 247 percent to 8.49 million mt.

Among the third-batch quotas, 78 percent are for Sinopec and PetroChina and the rest are for Sinochem, CNOOC and China National Aviation Fuel Corporation (CNAF).

The gasoline quotas for Sinopec were reduced by 350,000 mt (from previous quotas for the year), while its jet fuel quotas were boosted by the same amount.

China's refined oil exports in January-September accounted for over 90 percent of the first two batches of quotas, JLC data indicates. The third batch of quotas will be needed for Chinese state-owned oil majors to boost gasoline and diesel exports in the fourth quarter of the year.

China has been encouraging general-trade exports of refined oil as the domestic market is oversupplied amid slow consumption growth or even drops in demand. The country's apparent consumption of gasoline amounted to about 94.01 million mt in January-September 2018, merely up by 3.10 percent from the corresponding period in 2017, according to data from the National Bureau of Statistics.

Related: Are OPEC And Its Allies Producing Too Much Oil?

Consumption growth slowed as the country's conventional car sales weakened and even recorded a year-on-year drop as from July 2018 when the country was promoting the use of electric cars. Meanwhile, China’s apparent consumption of diesel dropped by 3.45 percent year on year to 119.45 million mt. Demand from the industry was falling when the country was strengthening environmental protection and removing outdated units.

Accordingly, Chinese refiners have been adjusting down the ratio of diesel output to gasoline. The country produced 104.21 million mt of gasoline in the first nine months of 2018, an increase of 5.65 percent year on year, while its diesel production fell by 1.43 percent to 133.37 million mt.

Chinese refiners may raise their refinery operating rates later this year if the domestic supply glut eases amid larger exports. Their operating rates have hovered between 78 percent and 81 percent in the second half of this year, JLC data indicates.

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The country's refined oil exports will continue growing as domestic supply is on the rise amid increasing refining capacity. Several large refineries have been scheduled to come online in late 2018 and push up China’s refining capacity further.

By JLC

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