China’s gasoline, gasoil exports to fall in H2 2021 after July slump

SINGAPORE (ICIS)–China’s gasoline and gasoil export by refiners is expected to register a sharper-than-expected decline in July.

The volume of gasoline and gasoil for the second half of the year is also predicted lower on a year-on-year basis until the issuance of the second batch of distillates export quotas by the government.

Only around 12% of the first-batch export quotas for distillates will be left for Chinese refiners after July and the government has not yet issued the second-batch export quotas.

Chinese refiners plan to export 500,000 tonnes of gasoil in July, down by 67% month on month and down by 9% year on year, according to ICIS data. This is the lowest level since June 2015 on ICIS record.

Their July planned export volume for gasoline stands at merely 90,000 tonnes, a plunge of 91% month on month and 92% year on year, respectively, also setting the lowest level since February 2008, ICIS data showed.

PetroChina and NORINCO Group had used up their first-batch distillates export quotas by June and other oil refiners have limited quotas available.

Of the 590,000 tonnes of gasoline and gasoil exports in July, only 60,000-tonne gasoline exports are from Zhejiang Petroleum & Chemical (ZPC) and the rest are all contributed by Sinopec’s subsidiary refineries.

China’s gasoline and gasoil exports in the first half of 2021 had grown significantly compared with the same period last year, driven by the slightly easing pandemic woes in overseas countries.

In January-June 2021, China exported 9m tonnes of gasoline, up by 14% year on year and 12.41m tonnes of gasoil, up by 9% year on year, according to January-May data from the General Administration of Customs (GAC) and refiners’ June export plan tracked by ICIS.

But to breakdown by months, China’s gasoline and gasoil exports have been falling since April and hit the year-to-date low in July.

Oil refiners having export quotas at hand trimmed exports in fear for potential tight supply in the domestic market, as the heavy turnaround season arrived in the second quarter and demand was picking up on improving economic conditions and rising temperatures.

Adding fuel to the concerns of a constrained supply is the government’s rectification of the domestic refined oil products market, including the levy of consumption tax on imported mixed aromatics, imported light cycle oil and imported cutback bitumen, effective from 12 June.

The government also launched inspections over Chinese teapot  refiners on crude import quotas.

Such measures aimed to curb surplus domestic output have stirred worries among market players about a short supply, prompting Chinese refiners to reduce exports.

The market is still waiting for the issuance of the second batch of quotas.

Oil refiners with available export quotas are expected to keep their monthly export volume low so as to maintain a certain amount of exports until the second-batch distillate export quotas are issued.

As for PetroChina and NORINCO Group, they have no export quotas left and have to divert to domestic sales.

Sources from Guangxi Petrochemical and Jinxi Petrochemical echoed this by saying that their production plans are based on domestic sales.

If the output cannot be fully absorbed domestically, the refiners are poised to cut run rates. PetroChina’s daily crude throughput in July is forecast to drop by 4-5% from June.

Analysis by Anita Yang