Spike in China's June oil product outflow squeezes export quota availability

China's higher-than-expected exports of key oil products in June will likely further squeeze refiners' export quota availability, limiting the country's outflow until new quota allocations are released.

The country's gasoline, gasoil and jet fuel exports totaled 4.72 million mt in June, data released by the General Administration of Customs on July 18 showed, 38% higher than earlier estimates of 3.42 million mt for the month.

Total exports over January-June were down 2.6% year on year at 26.29 million mt, leaving 3.21 million mt of quota allocations available.

As a result, China's oil product exports for July onward are set to remain low until the next round of quota allocations is released.

China was expected to export around 1.15 million mt of gasoline, gasoil and jet fuel in July, a six-year low, due to the tight quota availability, S&P Global Platts reported June 29.

PetroChina, the country's dominant gasoline exporter, planned to send out only low volumes of the fuel by truck from its Yunnan Petrochemical refinery in July.

There is widespread talk in the market that Beijing is planning to release the second batch of quotas for the rest of the year later in the week, with a total volume of about 9.5 million mt.

However, even if 9.5 million mt of new quotas proves correct, the total allocation for 2021 at 39 million mt would be 14.7% lower than the actual exports of 45.74 million in 2020, S&P Global Platts data showed.

Gasoil surges

The gasoil export data for June showed the widest gap against estimates. Gasoil outflow rose 40.5% month on month and surged 127.7% from a year earlier to 2.36 million mt in June, GAC data showed. The volume was 66% higher than the 1.55 million mt estimated in late May.

"Refineries did lift gasoil exports in June from their initial plan due to slow domestic sales and high inventory, especially in the second half of the month," a source with a Sinopec refinery in eastern China said.

"Gasoil output rose in June, while light cycle oil tanks were filled with the previous arrivals, forcing Chinese oil companies to offset the surplus by increasing exports as the regional price was not bad," a Singapore-based analyst said.

China's refineries produced 13.25 million mt of gasoil in June, up 4.1% from May, data from the National Bureau of Statistics showed.

The monthly average of the Mean of Platts Singapore gasoil assessment was $78.82/b in June, up 6.68% from $73.88/b in May, Platts data showed. In comparison, Sinopec's ex-refinery price for June rose only 2.86% month on month to Yuan 6,813/mt ($141.14/b) in June after taxes and fees, data from local information provider JLC showed.

"Actual exports in end May and early July were possibly included in the June data due to the time variance against administration work," the Sinopec source added.

China's jet fuel exports in June at 910,000 mt were up 59.6% month on month, while gasoline exports fell 6.5% over the same period to 1.45 million mt, GAC data showed.

Jet fuel outflow over January-June slumped 52.1% on the year to 3.72 million mt amid pandemic restrictions on aviation globally, making it the only key product to register a year-on-year decline.