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China gasoil exports likely to hit over six-year low in Oct on rising domestic prices, tight quotas

Highlights

Top refiner Sinopec's October gasoil exports expected to slump 63% on the month

China's October gasoline exports also expected to fall 34% on the month

October jet fuel exports expected to rise to 1 million mt

China's October gasoil exports are likely to plunge 47% month on month to a more than six-year low of 310,000 mt because of soaring domestic prices and tight export quota availability, sources with knowledge of the matter told S&P Global Platts Oct. 8.

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The country's gasoil exports were last lower at 300,000 mt in March 2015.

State-run refiners Sinochem and CNOOC, and privately held Zhejiang Petroleum & Chemical would omit gasoil exports for the second straight month in October, while the estimated outflow from China's top exporter Sinopec is expected to slump 63% month on month to 150,000 mt, sources said.

The decline is likely to be less severe at PetroChina, whose exports are expected to drop 14% on the month to 120,000 mt in October, with its Dalian Petrochemical and Dalian Wepec units contributing 100,000 mt of the outflow, S&P Global Platts reported earlier.

Norinco is expected to be the only exporter to keep its outflows unchanged month on month at 40,000 mt in October, as gasoil makes up for most of its Huajin refinery's oil products, and the company must use up its quotas to secure volumes in 2022, sources said. Huajin does not produce gasoline and its jet fuel output is 60,000 mt/year.

"Domestic gasoil price continues to rise, while it is unlikely to have addition export quota in rest of the year," a source at Sinopec said, citing the reason for a sharp decline in October gasoil exports.

PetroChina was offering gasoil at Yuan 7,500/mt ($156.12/b) in Guangdong province's wholesale market Oct. 8, up from Yuan 7,400/mt Sept. 28 and Yuan 5,800 Sept. 14, due to tight supplies, sources said.

Unless the Chinese government allocates new export quotas for 2021, only 5.87 million mt, or 1.47 million mt/month, of quotas were available for gasoline, gasoil and jet fuel exports between September and December, Platts reported earlier. China exported 31.13 million mt, or 3.89 million mt/month, of oil products between January-August, data from the country's General Administration of Customs showed.

China's gasoline exports also expected to fall 34% month on month to 694,000 mt in October due to the limited quotas, sources said.

Jet fuel exports to sustain

Chinese oil companies are expected to export about 1 million mt of jet fuel in October, including the barrels sent to China's airports for fueling international flights, up from more than 700,000 mt in September, according to sources.

"We intend to save the limited quota to sustain jet fuel exports due to oversupply in domestic market," a Beijing-based source with a state-owned oil giant said.

Sinopec is expected to be the leading exporter of jet fuel in October, with outflows at 510,000 mt, while Sinochem, CNOOC and PetroChina are each expected to export about 140,000 mt to 190,000 mt of the fuel, sources said, with PetroChina's Guangxi Petrochemical exporting about 140,000 mt of jet fuel in four cargoes, stable month on month.

Domestic air travel in China is expected to remain dull due to the government's movement restrictions to control COVID-19 ahead of the upcoming Winter Olympics in February.

The number of tourist trips during the Chinese Golden Week holiday Oct. 1-7 fell 1.5% year on year to 515 million and were at 70% of the pre-COVID level during the same period, according to the Ministry of Culture and Tourism.

The Chinese government lifting consumption tax on jet fuel barrels for aircraft fueling July 1 has dampened kerosene demand for blending purposes, causing an oversupply of the fuel.