China's fuel oil exports over January-June slumped 7.3% year on year to 9.09 million mt (318,982 b/d), pressured by a sharp rise in domestically produced barrels amid ambitious plans to expand its bunkering industry, General Administration of Customs data showed July 22.
¿No está registrado?
Reciba alertas diarias y avisos para suscriptores por correo electrónico; personalice su experiencia.Registro
About 5.88 million mt of the exports over the first six months were domestically produced barrels, instead of re-exported barrels from other origins, reflecting a 16.5% year-on-year rise in outflows, according to S&P Global Commodity Insights' estimates based on the GAC data.
All the barrels exported in H1 2022 were reported under customs warehouse trade route, suggesting that they were exported for bonded bunkering at Chinese ports.
With Beijing's latest allocation of 2.5 million mt of bonded low sulfur fuel oil export quota released earlier in July, the first three tranches of quotas issued since 2022 totaled 12.25 million mt, up 11.4% from the same batches the previous year, S&P Global reported earlier.
Encouraged by the rising quotas, Chinese refineries ramped up LSFO production to a historical high of 1.31 million in June, up 10.6% on the month and 38.1% higher on the year, raising January-June production volumes by 44.3% on the year to 7.12 million mt, according to local information provider JLC.
Import volumes classified under the general trade route, which implies inflows of feedstocks for domestic refineries, jumped 137.2% on the year to 2.01 million mt in H1 2022.
China's fuel oil net exports jumped 56% month on month to 581,059 mt, while fuel oil imports, under both bonded warehouse and general trade routes, slid 19.8% to 827,678 mt in June, the GAC data showed.
Adverse weather dampens Zhoushan's demand outlook
Disruptive weather slowed the pace of bunker sales since July, although the gradually rising LSFO stockpiles eased local bunker suppliers' concern after having faced supply shortage from April through early June, according to China-based traders.
At least one of the state-owned oil majors which missed bunker sales targets in June, reportedly raised LSFO production levels on hopes of pushing July bunker sales, as high bunker prices at the North Asian bunker hub of Zhoushan subdued demand in June, traders said.
Bonded bunker sales over January-June at the port of Zhoushan rose 11.6% on the year to around 2.76 million mt, while volumes sold in June slipped 25.7% on the month to 401,900 mt, according to sources with knowledge of the matter.
"LSFO supply situation in China is now quite balanced against demand," a Zhoushan-based trader said.
The Platts Zhoushan-delivered marine fuel 0.5%S bunker premiums over the benchmark FOB Singapore Marine Fuel 0.5%S cargo assessments slipped to average $98.02/mt July 1-21, compared with $101.32/m in June, S&P Global data showed.
"The weather situation in July, such as sea swells, have delayed ex-wharf loading and bunkering operations," a Zhoushan-based bunker supplier said July 22.
Forecast of strong winds, high sea swells, and thunderstorms at the port area of Ningbo-Zhoushan and waning demand was expected to weigh on LSFO bunker premiums, local bunker suppliers said.
These days, the spot market is quieter than in June due to the bad weather," a second Zhoushan-based bunker supplier said.
Since July, Ningbo-Zhoushan port area experienced rough sea conditions and strong gales that topped a scale of 9, according to recent reports by Zhoushan Marine Station's meteorological services.