China set to lift bonded jet fuel refueling in 2024 as outbound flights rise

China is set to increase bonded jet fuel refueling at its international airports as overseas flights rise in 2024, which could help cap clean oil products exports amid expectations that Beijing would keep the annual export limit unchanged from 2023, traders and analysts said Feb. 23.

Chinese products exporters are likely to gradually lift their jet fuel exports in the first quarter, including barrels for bonded refueling and that to be directly shipped overseas, according to market sources.

They initially targeted to export a total of about 2.2 million mt (17.38 million barrels) of jet fuel in March, rising from about 2 million mt in January and February, the market sources said.

In comparison, China's monthly combined jet fuel exports ranged from 830,000 mt to 1.59 million mt in 2023, according to customs data.

"Most of the increment will go to China's international airports amid more outbound flights," a Shanghai-based refining source said.

The country's number of outbound flights hit 3,000/d ahead of the Lunar New Year holiday in the weeks ended on Jan. 27 and Feb. 3 amid a travel rush, data from RadarBox showed. In the holidays of 2023, which fell in late January, the numbers were just around 1,000/d.

"The borders are completely open, with visa restrictions removed, encouraging travels overseas. While China remained in a wave of COVID-19 infection during the Lunar New Year in 2023," a source with Southern China Airlines said.

Most recently, Singapore allowed Chinese passport holders to be exempted from visa requirements for a stay of up to 30 days in the city-state, effective Feb. 9.

Domestically produced jet fuel barrels for bonded bunkering into outbound flights at China's airports are reported as exports by customs and required to use export quotas.

In 2023, about 3.56 million mt of domestically produced jet fuel were exported for bonded bunkering, S&P Global Commodity Insights estimated, compared to about 11.92 million mt of cargo export shipments.

"Demand for jet fuel bonded bunkering is set to see a year-on-year increase, which would weigh on the cargo exports of gasoline, gasoil and jet fuel unless the government lifts export quota allocation in 2024," said Sijia Sun, an associate director with S&P Global's downstream research and analysis.

Gasoline exports can hit low in Feb

Chinese oil companies targeted to export about 730,000 mt gasoline in March, up from a target of 680,000 mt for February, despite being lower than the 1.03 million mt export target in January, market sources said.

If actual exports meet targets, the volume in the peak traveling season of February would fall below the lowest monthly level of 760,000 mt seen in 2023.

Chinese customs has scheduled to release export volumes of different products for January and February March 18.

The gasoil exports target was set at 1.06 million mt for March, compared to 910,000 mt for February and 990,000 mt for January, market sources said. The targets were within the monthly outflow range of the product between 290,000 mt and 2.39 million mt, customs data showed.

China has issued 19 million mt of export quotas for gasoline, gasoil and jet fuel in its first batch for 2024, almost flat compared to the total 18.99 million mt issued in the same batch for 2023.

Analysts said the allocations further confirm the government's tone to control the annual outflows with stable limits as in 2023.

On an annual basis, S&P Global projected China's clean products exports to be around 900,000 b/d in 2024, about the same as in 2023.

China's clean oil products exports target:*

(million mt)

*The actual exports will be different from the targets.

Source: market sources