China’s oil products exports are set to rebound in January as refiners, armed with fresh quotas, boost diesel shipments and jet fuel sales for peak Lunar New Year travel, estimates from traders and analysts showed.

Resurgent fuel exports from China, which overtook the United States to become the world’s top refiner by capacity last year, will help to keep global diesel markets well-supplied and cap prices.

January refined fuel exports will likely rise by at least 10% from December to between 3.5 million and 3.6 million metric tons, with diesel more than doubling and jet fuel sales rising on demand from international flights, according to consultancies and trade sources.

This would be up from an estimated 3.1 million tons in December, based on Reuters calculations.

The increase follows Beijing’s announcement of the first 2024 batch of 19 million metric tons of export quotas, steady from last year.

January diesel exports are expected to reach about 975,000 tons, an average of estimates from FGE, Longzhong and Wood Mackenzie showed, up from 450,000 tons last month.

Chinese refiners’ export margins swung between $2 a barrel and a slight discount over the last month, still lucrative for exporters, a China-based trade source.

Refiners also boosted exports after commercial diesel inventories expanded in response to a low demand season in the transport and industrial sectors during winter, a second China-based trade source said.

February diesel exports will stay strong because of weak domestic demand during the Lunar New Year holidays, a third source said. None of the sources could be named because they were not authorised to speak publicly.

Rising exports from China and the Middle East are adding to global supply this year, easing supply concerns after record low inventories and nervousness over disruption of Russian exports pushed up diesel prices over the last two years.

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Jet fuel exports are likely to hit roughly 1.63 million tons, the highest in more than a year, the median of estimates from Longzhong and Wood Mackenzie showed, as more people travel abroad during the Lunar New Year break that officially falls on Feb. 10-17.

This compares with around 1.5 million tons estimated for December last year.

China counts the refuelling of planes flying out of the country on international routes using jet fuel from bonded warehouses as exports.

China’s international flight numbers for January are likely to hit around 70% of pre-pandemic levels, up by around 8 percentage points from December last year, analysts from Jefferies said in a research report.

Refiners are also likely to increase jet fuel output this month by at least 2% after the fuel’s premium jumped to their highest in five years against gasoil, the source added.

Gasoline exports are likely to be flat at 800,000 to 1 million tons this month after refining margins turned negative, estimates from traders and Longzhong showed.
Source: Reuters (Reporting by Trixie Yap, additional reporting by Jeslyn Lerh; Editing by Florence Tan and Barbara Lewis)