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Analysis: China's gasoil exports to rebound as Beijing hands out new quotas

Increase font size  Decrease font size Date:2017-06-02   Views:740
China's gasoil exports fell sharply in April from the previous month's record high, as a cocktail of lower stocks and reduced output at home prompted refiners to keep more barrels for local use, but market participants expect outflows to rebound in May on the back of new quotas.

China's April gasoil exports fell 35.7% month on month to 1.23 million mt, easing from a record high of 1.91 million mt in March, according to General Administration of Customs data released Wednesday.

"Exports have returned to a more normal level -- a level we normally see when domestic output goes down," said an analyst in Beijing.

Gasoil stocks at the end of March dropped 7.3% month on month, after posting two consecutive month-on-month gains of 29.7% and 39.2% end- February and end-January, respectively, according to data released by the state-owned news agency Xinhua. This indicated that less gasoil was available for exports in April.

In addition, gasoil production fell 6.5% month on month to 14.55 million mt in April, following lower refinery crude throughput because of the turnaround season, latest data from the National Bureau of Statistics showed.

Lower availability of gasoil in the domestic market prompted refineries to send fewer barrels abroad in April.

The peak turnaround season also forced refineries to cut export plans for April. PetroChina's Dalian Petrochemical in the northeast canceled its plan to export two MR-sized cargoes of gasoil in April because of maintenance.

In the same month, Sinopec exported around 551,159 mt of gasoil from its refineries in the southern and eastern coasts, according to S&P Global Platts estimates based on customs data. This was a drop of 38.9% month on month from an estimated 902,000 mt exported in March.

The bulk of the fall in exports from Sinopec were from Sinopec's Qingdao Refining and Jinling Petrochemical, while Sinopec Tianjin boosted exports in April.

PetroChina was estimated to have cut gasoil exports by 39% month on month to around 404,945 mt in April from its refineries in northeast China. Gasoil exports from the region were 664,000 mt in March.

The Sinochem-owned Quanzhou refinery was also estimated to have cut its gasoil exports by around 22.8% to about 173,947 mt in April, from 225,000 mt in March. China's gasoil exports are mainly from state-owned refineries owned by Sinopec, PetroChina, CNOOC and Sinochem.

However, actual exports of gasoil from PetroChina may have been higher than the registered volume in April. Last month, PetroChina Guangxi had carried out its plan to export 156,000 mt of gasoil through the Nanning customs but GAC data showed that to be zero, meaning actual shipments were not reflected in the data.

GAC may have also missed some export data from Sinopec's Qingdao Petrochemical, which had exported around 275,000 mt of gasoil in April, but customs data showed it to be only around 7,000 mt.

"There could be some lag in the customs accounting," said a Guangxi refinery source.


With refinery turnarounds easing from the peak level in April, exports of gasoil are expected to rebound in May, according to S&P Global Platts China Oil Analytics.

"With new export quotas becoming available since mid-May, we will likely see higher exports of gasoil from China, as major refineries will resume normal exports after maintenance," said Hou Rui, an analyst at COA, adding that gasoil exports could rebound to around 330,000 b/d in May as refineries are eager to push out the barrels because of weak domestic demand.

China last week allocated a new round of oil product quotas amounting to 6.29 million mt -- for exports under the general trade route -- to the country's four major oil product exporters. This will enable refineries to carry out their export plans on time.

Gasoil is the largest oil product consumed in China but the fuel's share in the overall apparent demand basket has fallen from 32% at the end of March last year to 29% at the end of March 2017.

It is now primarily used by the commercial vehicles sector, which accounts for about 65% of the total demand, while the rest is consumed by industrial, farming, fishing and other industrial sectors.


In contrast to the drop in gasoil exports in April, China's exports of gasoline rebounded by 8.9% month on month to 910,712 mt, because of slightly lower demand for driving by the household sector after the festival season ended in early April.

Responding to lower domestic demand, Sinopec raised gasoline exports by 122% to 298,546 mt in April from its Hainan and Qingdao refining plants, according to Platts estimates based on customs data.

China's major gasoline exporter PetroChina cut its exports of the product to around 395,654 mt in April -- down 15.8% from 470,000 mt in March.

Exports from PetroChina's refineries normally account for over 50% of total gasoline exports, but this dropped to 43% in April from 56% in March.

Looking into May, China's gasoline exports are expected to rebound to around 150,000 b/d, because of increasing demand in the domestic market, according to COA.
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