China Refineries Loom Over Asia With Record Oil Product Exports

China issued a second batch of fuel export quotas for this year to domestic refiners, allowing for 28 million tonnes of shipments.

OILMONSTER.COM- The rebound in China’s crude oil processing in April looms large over Asia’s refineries, which are already battling weak profit margins from the slump in fuel demand caused by lockdowns aimed at containing the coronavirus pandemic.

China’s refineries processed the equivalent of 13.1 million barrels per day (bpd) in April, up from a 15-month low of 11.78 million bpd in March, according to calculations based on official data released on May 15.

While the higher processing rate reflects a recovery in fuel demand in China after it lifted most lockdown restrictions, it also raises the likelihood that more refined products will be exported into a well-supplied Asian market.

There are already signs that China’s modern, low-cost refineries are playing a bigger role in Asia’s refined product markets, with official data showing fuel exports at a record-high 8 million tonnes in April, up 10.2% from March and 29.7% from the same month in 2019.

While a full breakdown by fuel type isn’t yet available, using a conversion factor of eight barrels of product per tonne gives a fuel-export figure of 2.13 million bpd.

For the first four months of the year, China exported 1.72 million bpd of refined products, up 15.1% from the same period in 2019.

The increase in fuel exports from China isn’t the sole reason for the regional weakness in refinery profit margins, but it certainly is a contributing factor, and appears to be largely structural rather than a temporary phenomenon.

China issued a second batch of fuel export quotas for this year to domestic refiners, allowing for 28 million tonnes of shipments, mainly for gasoline, diesel and jet kerosene, Reuters reported on May 11, citing four sources.

This follows the first 2020 allowance of 27.99 million tonnes and means Chinese refiners can keep product exports at the current high levels, should they so choose.

Courtesy: www.reuters.com