China likely to skip gasoil exports in Nov to ensure supply at home

Chinese oil companies are likely to keep all their gasoil barrels at home and skip exporting the middle distillate in November to guarantee domestic supply while export quotas are running out, according to sources with knowledge of the matter.

China has been suffered from gasoil supply shortage since September as refineries slashed the output while new hefty consumption tax on imported light cycle oil, a blending material of gasoil, shut the access of the inflow.

Sinopec, the world's biggest refiner by capacity, slashed its gasoil output by 10.3% year on year in January-September, followed by PetroChina, production of which slumped 11% in the same period, according to the companies' Q3 results.

As Beijing urged state-run companies to ensure domestic energy supplies while commodity prices rising, Sinopec has announced to increase gasoil supply by lifting production and rearrange export plans, an senior official said during the company's result call on Oct. 29.

Meanwhile, its leading gasoil exporting refinery, Sinopec Shanghai Petrochemical, has suspended sending the barrels to overseas, a refining source told S&P Global Platts.

Moreover, oil product export quotas are running out despite market sources expected oil companies would transfer about 2 million mt of fuel oil export quotas to export gasoline, gasoil and jet fuel in rest of the year.

Beijing has issued 37 million mt of quota for exporting the three key oil products in 2021. Over January-September, China's exports of the products amounted to 33.7 million mt, according to data from the General Administration of Customs.

This showed that the oil companies' quota availability fell to about 5.3 million mt or an average of 1.77 million mt/month for the fourth quarter even with the additional quotas transferred from fuel oil, slumping from 3.74 million mt/month in the first nine months.

Gasoline, jet fuel exports

The quota holders are estimated to export 770,000 mt of gasoline in November, 11% higher the estimated of 694,000 mt for October.

Zhejiang Petroleum & Chemical is likely to lead gasoline exports in November, by sending 300,000 mt to overseas market, up 163.2% from the estimated 114,000 mt in October.

The 800,000 b/d private integrated plant is boosting its production in next month in order to maximize usage of its newly 12 million mt of crude import quota issued on Oct. 25 by lifting utilization rate from 70% in this month.

PetroChina, the typical top exporter for gasoline, likely to send 200,000 mt of gasoline in November, down 13% from the estimated 230,000 mt in October.

Meanwhile, jet fuel exports is estimated at 550,000 mt in November. Sinopec is likely to contribute 310,000 mt of the exporting barrels, compared to 510,000 mt in October.

Sinochem is likely to cut its jet fuel exports to 40,000 mt from 140,000 mt for October. The state-owned oil firm will shut its Quanzhou Petrochemical for a scheduled 40-50 day maintenance over November-December, leading to a decline in oil product supplies in both domestic and overseas market.