China cuts diesel, gasoline exports
SINGAPORE: China is scaling back gasoline and diesel exports in August after a big rise in domestic prices encouraged them to sell more fuel locally, boosting lacklustre consumption growth, traders and analysts said.
The August exports are the first sign that refiners may be supplying more fuel into the domestic market, where analysts believe continued strong demand growth has been left partly unsatisfied by refiners trying to avoid loss-making sales. This year’s flood of exports have led to weak apparent consumption rates, a major worry for oil traders counting on another year of expanding demand from the world’s No. 2 consumer.
China, Asia’s top gasoline supplier, reduced August exports of the motor fuel by nearly 30 percent versus July to 340,000-400,000 tonnes, the lowest since February, industry sources with top refiners Sinopec and PetroChina said this week. Exports of diesel will fall 40 percent from July to 130,000 tonnes, although this is still a reversal from last year, when refiners imported large volumes of the product.
Chinese industry sources had also attributed the drop to slack regional end-user demand for diesel after the removal of subsidies in many Southeast Asian nations and high Singapore benchmark prices. Both companies will continue to shun imports as local prices are still 500 yuan ($61.70) a tonne below the cost of spot diesel on the international market, sources say.
PetroChina will resell all its contractual diesel supplies in Asian spot market. The oil exports plan suggests that oil demand, which contracted almost 1 percent in the second quarter, may be coming into line with economic growth, which grew 9.5 percent in the first half. “With GDP growth higher than expected, and with no big slowdown in the industrial area, oil demand should be fairly buoyant,” said CLSA analyst Gordon Kwan in Hong Kong.
Higher prices curb outflows: Analysts said the dissociation between the economy and oil consumption had been caused by China’s below-market retail price caps and soaring global prices, which turned margins negative and prompted refiners to maximise exports and stifle local supply.
China ramped up gasoline exports by 32 percent to more than 150,000 barrels per day (bpd) in the year through June, while diesel exports surged 140 percent to 26,000 bpd in the same period, Chinese customs data showed. But Beijing’s twin decisions last week to raise retail fuel prices by about 6 percent and revalue the yuan currency by 2.1 percent gave import-dependent refiners’ profit margins a much needed boost. reuters