BEIJING: China’s state-owned oil refiners are seeking extra oil-product export quotas for the fourth quarter to reap higher overseas profits and to offload surplus supplies, said three sources with knowledge of the matter on Thursday.
Chinese state refiners submitted their requests to the Ministry of Commerce two weeks ago, requesting for extra quotas as some of them have used up most of their allocated volumes in August, the sources said. “We are requesting for quotas to export more jet fuel and gasoline to meet demand in other parts of the Asia,” said one of the sources, an official from a state refiner who declined to be named as he is not authorized to speak with the media. A ramp-up in Chinese fuel exports would be timely as an arbitrage window to ship jet fuel from Asia to the United States in the wake of Hurricane Harvey has opened. The storm has shut a fifth of U.S. oil refining capacity, triggering worries about a fuel supply crunch. Refinery outages in the United States could provide export opportunities even as U.S. inventories remain high, said another of the sources, an official with a state refiner. The sources said that they are likely to receive the extra quotas they requested. However, they did not provide their requested volumes. The Ministry of Commerce will issue the fourth-quarter quotas next month.
China’s overall fuel exports during the January to July period are already 8.5 percent higher than the same period in 2016 at 28.25 million tonnes, the country’s General Administration of Customs has reported. The extra quotas could spur higher crude demand in the world’s largest importer as the extra fourth-quarter allocation is filled. Beijing has granted 32.365 million tonnes of fuel export quotas so far this year to state-owned companies China National Petroleum Corp, Sinopec Corp, China National Offshore Oil Corp and Sinochem Group. “Gasoline and diesel exports have enjoyed good margins recently that’s why companies hope to ship out more,” a Beijing-based oil products trader said. The gasoline crack spread has spiked to $15.63 a barrel as of Thursday, up from $8.56 on July 3. The diesel crack has shot up to $15.76, from $12.46 on Aug. 22. China controls export quotas every quarter to ensure sufficient fuel supplies for domestic needs. This year, Beijing tightened export volumes after the companies did not use all of last year’s allocation and on environmental concerns, trade sources said. The government is also set to keep in place a ban on fuel exports from independent refineries.