China’s diesel exports could fall to an eight-month low in March as refiners focus on meeting local demand and increasing domestic stockpiles ahead of planned overhauls at refineries, a Reuters survey showed.
Lower Chinese exports also point to a recovery in domestic fuel demand and prices after the world’s second-largest oil consumer lifted COVID-19 measures.
The decline in exports could tighten Asia’s supplies and provide support for refiners’ diesel margins, especially as the region enters peak demand season from the agriculture and construction sectors between April and July.
Exports of the industrial and transportation fuel are estimated at 400,000 to 770,000 tonnes compared with estimates of about 2 million tonnes in February, a survey of consultancies JLC, Longzhong and Refinitiv, and two China-based trade sources showed. Diesel exports were last at similar levels in July last year, China customs data showed.
This could bring the combined March exports for all three products – diesel, gasoline and jet fuel – to between 1.5 million and 1.94 million tonnes, at least 50% lower than February’s estimate of 3.9 million to 4.15 million tonnes, the survey showed.
The need to secure sufficient domestic supply during the peak maintenance season for Chinese refineries is a major reason for lower diesel exports, Vortexa analyst Emma Li said.
Between 600,000 and 800,000 barrels per day (bpd) of crude processing capacity will be shut between April and June, curbing refined products output, Reuters calculations and consultancies’ data showed. REF/A
Another factor is that Chinese exporters’ profits have fallen, sapped by a more than 30% drop in Asian diesel cracks GO10SGCKMc1 since mid-January. Domestic netbacks are more favourable as local retail prices have fallen less than international prices, a Singapore-based trader said.
Chinese refiners are also less inclined to use up their export quotas quickly as Beijing is expected to curb exports in 2023 versus 2022, Vortexa’s Li added.
JET FUEL, GASOLINE
March exports for jet fuel are also expected to decline, falling to an estimated 690,000-to-810,000 tonnes, the survey showed, an at least 50% decrease from February estimates as domestic demand rebounds.
Weekly domestic air passenger numbers hovered near the 10-million mark in the week ended March 12, recovering to 82% of 2019 levels, Variflight data showed.
China’s gasoline exports were expected to be steady at between 300,000 tonnes and around 362,000 tonnes in March as domestic demand recovers, the survey showed. Last month’s survey showed gasoline exports were likely to fall to eight-year lows in February.
The traffic congestion index in major Chinese cities has surpassed the level of the same period last year, Baidu 9888.HK real-time traffic data showed.
Source: Reuters (Reporting by Trixie Yap, Muyu Xu and Chen Aizhu; Editing by Florence Tan and Barbara Lewis)