China's gasoil, gasoline and jet fuel exports in June dropped to a seven-year low of 1.58 million mt, or 426,000 b/d, data released by the General Administration of Customs July 18 showed, despite new quota allocations.
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The June volume represented a 66.7% year-on-year slump and a 10.7% month-on-month decline, far below the market's estimation of up to 3 million mt.
GAC data showed that the previous low was 899,000 mt in February 2015.
"Even with the second batch of allocation, oil companies slashed their exports to a record low level in July, suggesting their cautiousness of using the quotas. They actually have abundant capacity to lift production and make more money by exporting if there is no quota restriction," a Singapore-based analyst said.
The government in early June issued the second round of export quotas, 4.5 million mt, leaving 7.15 million mt of quotas for June onward, until 5 million mt of quotas were released in the third round in early July.
This brought the country's oil product exports collectively lower by 54.7% on the year to 11.9 million mt (533,000 b/d) in January-June, leaving 10.6 million mt of quotas for the second half of 2022.
"If the oil companies keep the same pace of export of about 1 million-2 million mt [of oil products] per month, the quotas look enough for them for the rest of the year," a Beijing-based analyst said, and estimated the exports in July to stand at about 1.5 million-1.7 million mt.
Refinery sources from Sinopec and PetroChina said their headquarters have been limiting the export of oil products, and they are likely to see recoveries in the short term but not strong rebounds.
Beijing is keen to cut the country's oil product exports to ensure domestic supplies and fight against global inflation with crude prices fluctuating at high levels. In the long term, the government aims to minimize exports in an effort to meet the country's "net-zero" target.
The three rounds of allocation take the total quota volume to 22.5 million mt so far for 2022, lower than the 37.61 million mt awarded in the three batches of 2021, data from S&P Global Commodity Insights showed.
Moreover, recovering domestic demand will ease inventory pressure, offsetting the need to export more barrels to international markets, analysts said.
The summer holiday season would support gasoline and jet fuel demand. Also, high temperatures during the summer have been pushing up demand of air-conditioning, raising expectations that more gasoline and gasoil will be burned as retail prices fell recently, they added.
Jet fuel exports hit 16-month low
Jet fuel exports dropped 43.2% year on year to a 16-month low of 520,000 mt (137,000 b/d) in June, GAC data showed, as domestic demand recovered.
The previous low was 510,000 mt in February 2021.
But because of higher exports in the previous months, China's jet fuel exports posted a 14.9% year-on-year increase to 4.28 million mt in H1, according to GAC data.
Beijing has gradually relaxed aviation restrictions since end-May on both domestic and overseas traveling, and as the summer holiday starts in July, air ticket prices are rising amid strong demand.
"Jet fuel cargo exports are set to decline as domestic demand picks up, but exports to China's international airports for bonded refueling will rise as the government eases controls on international flights. So ... the total jet fuel export volume will be supported," the Singapore-based analyst said.
China's jet fuel exports comprise cargoes sent overseas and the barrels used for refueling its international airports.
Gasoil exports rise from 7-year low
Gasoil exports rebounded by 170.6% to 330,000 mt in June from the seven-year low in May, GAC data showed.
But the volume remained below the 2.37 million mt registered in the same month last year.
In January-June, China's gasoil exports slumped 84.2% year on year to 2.06 million mt.
Gasoline exports continued the trend of monthly declines seen since April, falling 13.2% to a 10-month low of 730,000 mt in June from May, GAC data showed.
The previously low was 570,000 mt in August 2021.
As a result, gasoline exports were at 5.56 million mt in H1, dropping 41.8% year on year, according to the GAC.
China's key oil products exports ('000 mt)
Source: General Administration of Customs
Notes: * was adjusted according to the % change provided by the GAC