China fuel exports to slip in Jan as Lunar New Year travel peaks

SINGAPORE, Jan 13 (Reuters) – China’s refined oil product exports could start 2023 with a 40% fall in January from the December figure, as Lunar New Year travel demand boosts domestic consumption of transportation fuels , trade sources and analysts said.

The fall in exports from China, which has the world’s second-largest refining capacity after the United States, is expected to underpin Asian refiners’ margins for transportation fuels.

China increased fuel exports in the fourth quarter of 2022 after Beijing reversed its policy to focus on economic revival from restoring refinery emissions.

On Friday, China reported its December refined fuel exports, which also include marine fuel oil, at 7.7 million tonnes, the highest since April 2020 and up a quarter from November, although that 2022 annual exports remained 11% below 2021.

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China’s diesel, gasoline and jet fuel exports to slip from record levels in Jan 2023 vs Dec 2022

Estimates for January exports of diesel, gasoline and jet fuel are between 3.8 million and 4.1 million tons, say Chinese consultancy Longzhong, JLC, and several trade sources.

The amount of gasoline, up to 840,000 tons, is likely to be the lowest among the products, they said.

“Wholesale and retail prices, especially for gasoline, have increased since the beginning of the year,” said one China-based trade source, speaking on condition of anonymity.

The price hike, which came as local traders and distributors expected strong driving demand during the holiday season, squeezed export margins, the source added.

Hundreds of millions of people are on the move this month as they return home to celebrate the Lunar New Year on January 22 this year.

Reuters graphics
Reuters graphics

Gasoline margins have rebounded to near $10 a barrel, the highest since August, on lower expectations for Chinese exports, traders said.

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92 gasoline cracks

Jet fuel exports were pegged at up to 1.2 million tonnes in January, down from up to 1.9 million tonnes in December, as demand for aviation fuel in China picked up, according to data compiled by Longzhong, JLC and two trade sources which is based in China.

Diesel exports are seen falling to between 1.7 million and 2.1 million tonnes, analysts added.

Chinese oil majors continue to take advantage of strong overseas margins for 10 ppm gasoline on low demand from the local construction sector during the winter, one refiner in northeast Asia said.

Asia gasoline splits per bbl

Two analysts at trading firms expect China’s exports to fall further in February, as state majors maintain a focus on meeting domestic demand, particularly for gasoline and jet fuel.

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China may reduce quotas in the second half of 2023 if domestic demand improves and its policy turns back to focus on energy transition, said senior analyst Emma Li at Vortexa.

China raised its first batch of 2023 export quotas for refined oil products to 18.99 million tons, up 46% from 13 million tons a year earlier.

This followed a significant release of 13.25 million tonnes in September, as the government sought to shore up the economy by encouraging refiners to expand operations and take advantage of strong export profits.

Reporting by Trixie Yap, Chen Aizhu, Muyu Xu; Editing by Florence Tan and Clarence Fernandez

Our Standards: The Thomson Reuters Trust Principles.

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