China's refineries will cut clean oil product exports in February as domestic demand in January was better than expected, refining and market sources told S&P Global Commodity Insights Feb. 3.
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Market sources expect the country's gasoline, gasoil and jet fuel exports to stand at about 3.9 million mt (1.1 mil b/d), below the previous estimate of 4.3 million mt for February.
S&P Global had previously projected China's clean oil product exports for the month at about 3.5 million mt, down from over 4 million mt in January.
Among the three products, most of the reduction in exports is expected to be for gasoline, the yield for which declined to a multi-month low in January amid a stronger-than-expected demand rebound during the Lunar New Year.
Refiners under state-owned Sinopec said they had reduced gasoline exports planned for the month as the company was unable to boost throughput due to limited feedstock availability in January and February. These refiners included Jinling Petrochemical, which decided to skip gasoline outflows altogether in January and February from about 66,000 mt/month in November and December 2022, a refining source said.
PetroChina's Dalian Petrochemical and Wepec, the oil giant's leading export refineries, have also reduced their gasoline exports to zero in February from 120,000 mt and 105,000 mt, respectively, in January, according to company sources.
China's gasoline product yield dropped to a 30-month low of 19.2% in December 2022, with the output at 11.51 million mt while exports stood at a 26-month high of 1.91 million mt, official data showed. This resulted in limited inventory in January when demand rebounded after the strongest wave of COVID-19 infections.
Domestic demand recovery
Market sources said that there had earlier been a risk of transportation fuel demand falling due to another wave of COVID-19 infections during the Lunar New Year, despite the pandemic seemingly peaking in December.
However, a resurgence in tourism was seen across China over the holiday period, which raised transportation fuel demand. The Ministry of Culture and Tourism said Jan. 27 that 308 million domestic trips were made during the Lunar New Year holiday, a 23.1% year-on-year rise to 88.6% of the levels seen in 2019.
"The demand rebound in Lunar New Year came as the first long holiday allowed people to travel freely in the country after a painful December due to COVID-19 infections. And the coming school season and more business travels in February will offer some support to demand," said Sijia Sun, an analyst with S&P Global.
China prioritizes oil product barrels to meet domestic demand, and sends only surplus cargoes overseas.
Jet fuel for bonded refueling
Unlike other countries, jet fuel barrels supplied to China's international airport for bonded bunkering of international flights are also accounted for as exports.
As China hastens measures towards a complete reopening, more international flights are set to be approved which will require more jet fuel for bonded refueling, a Singapore-based trader said, adding that more jet fuel "exports" that fall under air travel was expected in February.
S&P Global data showed that China's domestic flights rose 89% month on month in January, while international flights increased 15% from December.