Weak demand, easing crude prices may prompt Chinese oil product exports in April

The combination of slowing domestic demand amid coronavirus lockdowns and falling international crude prices was easing pressure on Chinese refiners to keep oil product barrels at home to ensure supply, raising the possibility of exports in April, analysts said on March 17.

The country's top economic planning body National Development and Reform Commission in the week ended March 13 asked oil companies to suspend April gasoline and gasoil exports to ensure domestic supplies amid international oil price spike, S&P Global Commodity Insights reported.

"However, as domestic demand slows down, while crude prices lose steam, it looks less necessary to keep all the oil product barrels at home," a Beijing-based analyst said.

Platts Dated Brent was assessed at $106.48/b on March 16, down from a 14-year high of $137.65/b on March 8, S&P Global Commodity Insights data showed.

As talks between Russia and Ukraine progress and with signs of Iranian and Venezuelan crudes potentially returning, analysts expected crude prices to become more affordable than in the last few weeks, easing the threat of supply shortage.

Instead, "oil product inventory is rising as transportation disrupted by lockdowns in more and more cities, which helps oil companies to appeal to NDRC to restore exports in April," a second Beijing-based analyst said.

China exported about 1.2 million-1.5 million mt of gasoline and gasoil in the fourth quarter of 2021, according to data from the General Administration of Customs.

The number of the country's COVID-19 confirmed cases has stood at over 1,000 since March 12, according to data from the National Heath Commission. This has led cities across 20 provinces and municipalities to implement movement restrictions with quasi-lockdowns seen in major cities including Shenzhen, Shanghai, Dongguan, and Jilin province.

Weak domestic demand

S&P Global's Platts Analytics adjusted China's oil demand downward by 650,000 b/d for March and 400,000 b/d for April from its original estimates due to the movement controls, according to a report dated March 16.

"Gasoline accounts for 60% of the demand loss while kero/jet takes around 26%. Damage to gasoil demand is estimated to be limited thus far due to the seasonal pull from industrial activities," Platts Analytics said in the report.

Moreover, gasoline, gasoil wholesale prices fell in China despite the government's decision to lift the ceiling guidance retail prices on March 18, reflecting weakened demand.

NDRC on late March 17 announced plan to lift ceiling retail prices of gasoline by Yuan 750/mt ($13.9/b) and gasoil by Yuan 720/mt ($15.22/b), effectively March 18, in line with international crude oil price changes during the previous 10 working days.

However, gasoline wholesale price in eastern China was estimated to fall Yuan 700/mt to Yuan 9,600/mt in the week March ending 19 from Yuan 10,300/mt in the previous week, according to local information provider Longzhong Information.