Singapore — Sinopec Economics & Development Research Institute expects China's oil product exports to rise 9% year on year to 51 million mt in 2019, as an increase in domestic product supplies surpasses demand growth, a report released on Thursday by the institute said.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
EDRI is the think tank of Sinopec, the world's biggest refinery by throughput and capacity.
"Oil product surplus will surge and competition will be more intensive, as two greenfield independent refining and petrochemical mega will bring about 10 million mt of new oil product supplies to the domestic market, which will be much higher than the domestic demand growth of 6 million mt," the report said.
The two new plants refer to Hengli Petrochemical and Zhejiang Petrochemical, with a capacity of 20 million mt/year (400,000 b/d) each. The North China-based Hengli started a trial run on December 15 while Zhejiang was expected to be online by mid-2019.
EDRI expects China's refining capacity to reach 880 million mt/year in 2019, up 45 million mt/year from 2018.
It projected China's oil product output to rise 1.9% year on year to 371 million mt in 2019. However, demand was expected at 323 million mt in 2019, a rise of 0.7%.
EDRI attributed the slow growth in demand to on-going trade tensions, environmental regulations and strong growth in substitute energy, which was eating the market's share of oil products.
Moreover, the institute projected that China's gross domestic product would slowdown to 6.2% in 2019, from 6.6% in 2018 and 6.9% in 2017. "Trade tensions [between China and the US], the pressure of currency depreciation, domestic debt risk, property market control and a weakening investment prospective - all weigh on economic growth," EDRI said in the report.
But Beijing will continue to control the country's oil product exports by quotas, which restricts China's outflow growth, the institute added.
EXPORTS BY PRODUCT
By product, EDRI expects the strongest exports growth from gasoil, which is forecast to rise 13.7% year on year to 21.5 million mt in 2019.
The institute said more gasoil will be exported as low sulfur marine gasoil for bonded bunkering, amid tighter emission controls in the shipping sector.
China's Ministry of Transport announced early December that vessels will be required to burn 0.5% sulfur bunker fuels when sailing within 12 nautical miles of China's coast, starting January 1, 2019.
Meanwhile, the institute said end-users' gasoil consumption in the domestic market would fall 1% year on year to 1.79 million mt in 2019, due to weakening demand from the transportation sector.
China will gradually phase out the gasoil-fuel trucks with less energy efficiency. Transportation demand from the industry also slowed down amid trade tensions, according to the report.
Gasoline exports were expected to rise 11.9% on the year to about 15.1 million mt next year, with the combination of slow new-car sales and rise in the use of substitute fuel hurting domestic demand.
EDRI expects China's 2019 passenger car sales to fall 4% year on year to 22.4 million units if there is no policy stimulation, compared with an average 8.7% year-on-year increase over 2014-2018.
However, new energy cars, including electric cars, are expected to rise 34% on the year in 2019 to 1.5 million units, eating into the market share for traditional gasoline-fuel cars, the institute said.
Meanwhile, jet fuel would be the only product among the three to register strong growth in the domestic market, said EDRI.
As a result, jet-fuel outflows was expected to rise marginally by 2% year on- year to 14.9 million mt in 2019, according to the report.
The institute added that China's aviation turnover would increase 11% year on year to 134 billion mt km, leading to a rise in jet fuel consumption.
-- Oceana Zhou, email@example.com
-- Edited by Shashwat Pradhan, firstname.lastname@example.org