China's oil companies import rare fine gasoline and gasoil cargoes to get good margins in the domestic market, but limited oil product import quotas are likely to cap these inflows, market sources said on June 28.
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CNOOC imported 50,000 mt of gasoline to make an importing profit of Yuan15 million/mt ($5.46/b), the company said on its WeChat platform on June 26.
The company's first batch of 25,000 mt gasoline was delivered by a vessel Chang Hang Hong Tu and injected into Huasheng's oil tank in eastern China's Nantong city on June 24, it added.
Purchasing prices for oil products have risen in the domestic market since April, while prices overseas remained weak amid the pandemic, suggesting an open arbitrage window for imports, CNOOC added.
A source with Sinochem echoed this sentiment, saying that its company also took the opportunity to import several cargoes of oil products from the international market to China.
"We took more gasoline barrels than gasoil, as gasoline is stronger in the domestic market. The hot weather and coming summer holidays would boost the fuel consumption for air conditioners," the source with Sinochem said.
Good import margins
China is a net exporter of fine oil products, and net outflows rose 18.6% year on year to 19.64 million mt in January-May. Over the same period, the country's oil product imports stood at 10.38 million mt, and about 46%, or 4.61 million mt, were fuel oil barrels for bonded bunkering, data from the General Administration of Customs showed.
"The recent gasoline, gasoil imports were driven by good import margins than domestic supply shortage," a Singapore-based trader said.
China's government has set the country's retail gasoline, gasoil ceiling prices to move in line with benchmark crude prices.
The ICE Brent price closed at $75.89/b in London on June 25, rising 20.6% from $62.95/b on April 1.
The wholesale price for 10 ppm 92 RON gasoline was around Yuan 7,988/mt or $89.82/b before consumption tax, value added tax and fees on June 28 in Guangdong province, the most active oil product trading region in China, according to a source with PetroChina.
The Mean of Platts Singapore 92 RON gasoline, the most liquid Asian gasoline benchmark in Asia, was assessed at $82.17/b on June 25.
Wholesale 10 ppm gasoil was offered at Yuan 6,388/mt or $87.58/b before the taxes and fees on June 28, the PetroChina source said, compared with MOPS assessment at $80.53/b on June 25.
The import volume is unlikely to rise further as Beijing has only allocated a small part of its import quotas for gasoline and gasoil, according to China-based market sources.
The exact volumes were not available to S&P Global Platts but market sources said the government allocated 200,000 mt for gasoline and 200,000 mt for gasoil in 2021, with the quota being shared by four state-owned oil giants - Sinopec, PetroChina, Sinochem and CNOOC. The sources added that Beijing is unlikely to add any new allocations to these quotas.
China used to increase blending material imports, such as light cycle oil for blending into gasoil and mixed aromatics for gasoline, when import margins were good.
The country introduced a consumption tax effective on June 12, which limited imports of such blending materials and encouraged imports of fine products.