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China's March gasoil exports hit 1-year high as refiners draw down excess inventory

Highlights

Improving crack spread bodes well for gasoil exports

Jet fuel exports recover but Q1 shipments still below 2020 level

Singapore — China's gasoil exports in March rebounded to a 12-month high at 2.81 million mt, as refiners stepped up efforts to draw down their excess inventories, while looking to capture improved export margins in the Asian middle distillates market, latest data from the General Administration of Customs, or GAC, showed. Exports were last higher in March 2020 at 2.83 million mt, the data showed.

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Gasoil exports were up 63.8% from a low base of 1.72 million mt in February, which was lower-than-expected as the some of the planned shipments had been delayed due to the seven-day-long Chinese New Year holiday in February.

The March gasoil exports were also much higher than market participants' expectation of 2.3 million mt, which could be attributed to the carried over exports from February.

China's five oil product export quota holders -- Sinopec, PetroChina, CNOOC, Sinochem, Zhejiang Petroleum & Chemical and Norinco -- had initially aimed to export 2.29 million mt of gasoil in March, according to S&P Global Platts market survey conducted in March.

"Domestic demand for gasoil has not recovered fully to the level seen before the COVID-19 pandemic," said a Sinopec refinery source when asked about the relatively high stockpiles in the domestic gasoil market.

Total exports of gasoil over January-March amounted to 6.25 million mt, just 0.8% lower from the same period a year earlier.

Looking ahead, improving gasoil crack spread will likely encourage Chinese refiners to continue shipping out more cargoes overseas to cut down any of their excess inventory, Singapore-based middle distillate trading sources said.

Second-month Singapore gasoil swap crack against Dubai swaps averaged $7.22/b in the first quarter of 2021, compared with $6.78/b in the fourth quarter of 2020 and $5/b in the third quarter last year, Platts data showed. The crack spread averaged $7.22/b to-date in April.

Jet fuel exports recover

Jet fuel exports continued to rebound, rising 97.2% on the month to 710,000 mt in March, marking a nine-month high and reflecting a slow but gradual demand recovery in the international market.

A few refineries, including PetroChina Dalian Petrochemical, have lifted jet fuel exports in March by 50% month on month.

However, the monthly export volume was still 51.6% below the level seen a year earlier, and total exports over the first quarter were 63.9% lower from a year earlier at just 1.59 million mt.

Q1 gasoline shipments

Gasoline was the only oil product among transportation fuels that posted a year-on-year growth over Q1, the GAC data showed.

Total gasoline outflows amounted to 5.09 million mt, which was up 12.1% year on year.

This could be mainly attributed to the new quota holder of Zhejiang Petroleum & Chemical, which freshly started to export gasoline since late 2020.

The refiner was expected to export at least 300,000 mt/month of gasoline and gasoil in the first few months this year, with gasoline making up the bulk of the international sales volume.

Meanwhile, driving activity and gasoline demand in many Southeast Asian countries and Australia have picked up in recent weeks amid easing movement restriction measures, providing a much needed avenue for the region's major transportation fuel suppliers including South Korea, China and Malaysia, Platts reported earlier.

Driving activity in Vietnam for one, has recovered to above baseline levels in mid-March, from the low of 55% below baseline levels in February, according to mobility data from Apple. It was around 8% above baseline as of April 20.

As a result, Vietnam is expected to import more than 100,000 mt/month of gasoline in April and May, according to middle distillates distribution and trading sources based in Hanoi and Da Nang surveyed by Platts earlier this month.

China's key oil product exports ('000 mt)

Mar-21
Feb-21
Change
Mar-20
Change
Gasoline
1,560
1,650
-5.5%
1,826
-14.6%
Gasoil
2,810
1,715
63.8%
2,828
-0.6%
Jet
710
360
97.2%
1,468
-51.6%
Total
5,080
3,725
36.4%
6,122
-17.0%

Jan-Mar 2021
Jan-Mar 2020
Change
Gasoline
5,090
4,542
12.1%
Gasoil
6,250
6,298
-0.8%
Jet
1,590
4,410
-63.9%
Total
12,930
15,250
-15.2%

Source: General Administration of Customs