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New Chinese Fuel Export Quotas Won’t Solve Supply Crisis

China has just issued the latest batch of fuel export quotas for refiners, and total quotas so far this year are 39 percent lower than the collective quotas this time last year—a sign that Chinese fuel exports are unlikely to ease the tight fuel market globally.

The Chinese authorities have approved the latest batch of export quotas for fuels, and it is for a total of 5 million tons, Reuters reported on Wednesday, citing sources. That would be enough for the refiners given quotas to make money with sales on the export market, but not enough to ease the global crunch in fuel supply.

So far this year, China’s total fuel export quotas are at 22.5 million tons, including the latest batch of quotas that was issued earlier than the market expected. The year-to-date export quotas are 39 percent below the same quotas awarded in 2021, according to Reuters estimates.

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.

Exports were reportedly limited in the aftermath of the Russian invasion of Ukraine, as Chinese authorities were said to have asked state refiners in the country to consider halting diesel and gasoline exports in April due to heightened concerns about oil supply.

Chinese diesel and gasoline exports so far this year have been well below last year’s, while COVID-related lockdowns hurt demand in the spring, swelling domestic Chinese inventories.            

The latest batch of quotas went to seven refiners, including state giants China Petroleum & Chemical Corporation (Sinopec), PetroChina, and China National Offshore Oil Corporation (CNOOC), as well as privately-held Zhejiang Petroleum & Chemical Co (ZPC). PetroChina and Sinopec have the largest export quotas, at 1.47 million tons and 1.27 million tons, respectively, according to the information Reuters has obtained.  

By Tsvetana Paraskova for Oilprice.com

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