Analysis: China's May key oil product exports set to fall to multi-year low

Singapore — China's total exports of three key oil products -- gasoline, gasoil and jet fuel -- are expected to fall to a multi-year low, possibly below 2 million mt in May amid negative export margins, refining sources and analysts said this week.

China's export of these three oil products had stood at over 2 million mt/month since August 2015 and rose rapidly to an average of 4.61 million mt/month in 2019, data from the General Administration of Customs showed.

Sinopec, China's top exporting oil giant, has slashed its exports by more than a half of its usual levels in the previous months, two refining sources with the company said this week, adding that the refiner preferred to sell its products at home.

An S&P Global Platts mini survey showed that six key Sinopec export refineries, which typically exports an overall average of 1.15 million mt/month of oil products, had cut their exports by 63.5% to 418,000 mt in May.

Gaoqiao Petrochemical skipped all seaborne exports in May, but sent 45,000 mt of jet fuel to Shanghai Pudong International Airport to fuel international flights, which the GAC counts as exports. The refinery usually exports 170,000 mt of gasoline, gasoil and jet fuel per month.

Guangzhou Petrochemical, which exported an average of 154,000 mt/month of products in 2019, has no export plans for May, except to ship 10,000 mt of gasoline to Singapore, which was delayed from April.

The export-oriented Qingdao Refining and Chemical had cut its May exports by 59.5% to 148,000 mt, from its usual 365,000 mt/month.

Among these polled Sinopec refineries, only Tianjin Petrochemical has suspended exports this month due to maintenance. The refinery normally sells 146,000 mt/month of oil products overseas.

SHARPER DROP IN PETROCHINA

Fellow refiner Petrochina, on the other hand, made even heavier cuts to its exports, with the four leading export refineries polled planning to export a mere 10,000 mt of gasoline from their usual volumes, which averaged 1.28 million mt/month in 2019.

The deep cut is mainly due to Dalian Petrochemical, PetroChina's top exporting refinery by volume, which is shuttered for maintenance and subsequently eliminating 550,000 mt/month of outflow.

Petrochina's second exporting refinery, the Dalian Wepec, while still operational will only ship 10,000 mt of gasoline in May from an average of 350,000 mt/month of gasoline, gasoil and jet fuel in 2019.

Guangxi Petrochemical, which has resumed operations in April after its maintenance, decided on nil exports for March, as opposed to its usually 300,000 mt/month outflow overseas.

Company sources with CNOOC's Huizhou refinery and Sinochem's Quanzhou refinery also said they have reduced their export plans for May without providing more details.

Trade flow trackers also showed a sharp drop in China's oil product exports in May.

Kpler, a trade flow tracker, on Thursday showed that China's gasoline exports fell to 119,000 mt so far this month, from an average of 1.45 million mt/month in the previous three months, with gasoil exports falling to 574,000 mt, from 1.65 million mt/month in February-April. Jet fuel exports were almost nil so far in May from 708,000 mt in February-April, Kpler showed.

HEALTHY DOMESTIC MARGINS

Chinese refineries had planned to cut oil product exports in April to enjoy healthy domestic margins, S&P Global Platts reported previously.

In late April, Sinopec's deputy head of operation management Ren Jiajun had attributed the company's cut in oil product exports to high freight rates and weak overseas margins.

In Guangdong province, where the import and export of oil products is active, the wholesale price for 10 ppm gasoil stood at Yuan 5,450/mt on Thursday, rising Yuan 200/mt, or $3.77/b, week on week, a Guangdong-based PetroChina trader said.

Before taxes and fees, the wholesale price was $63.64/b, 65% higher than the Mean of Platts Singapore 10 ppm gasoil assessment at $39.28/b at the Asian close on Wednesday, Platts data showed.

The wholesale price for 10 ppm 92 RON gasoline rose Yuan 380/mt ($6.29/b) to Yuan 5,150/mt on Thursday from a week ago, the PetroChina trader said.

The price was equivalent to $39.80/b before taxes and fees, a contrast to the MOPS 92 RON gasoline, which Platts had assessed at $34.67/b at the Asian close on Wednesday.

Meanwhile, China's aviation sector is poised for a rebound as more domestic flights start taking to the skies, while the country's jet fuel output yield slumped to an eight-year low of 4.5% in April, from an average of 8.1% in 2019.

When overseas jet fuel demand was weak amid high inventories, Chinese refiners decided to keep the barrels at home, refining sources said.

According to media reports, China Eastern Airlines -- the country's second-largest domestic carrier -- is planning to resume 70%-80% of all its domestic flights by end-June. The Chinese domestic aviation sector resumed 208,700 flights in April, a 6.47% jump on the month, the Civil Aviation Administration of China reported.