MOSCOW (MRC) - China may close the year with record shipments of key transportation fuels in December as refiners rush to use their export quotas and maximize overseas profits to compensate for tepid domestic fuel demand caused by COVID-related curbs, said Hydrocarbonprocessing.
December exports of diesel, gasoline and aviation fuel combined are estimated at 6.5 million to 7.1 million tons, led by diesel shipments that could reach 3 million tons, according to estimates from Chinese consultancy Longzhong and JLC, Refinitiv Oil Research and several trading sources.
China's diesel exports hit an all-time high of 2.83 million tons in March 2020, followed by a record 6.5 million tons in April for all three products, according to Chinese customs data. Bumper shipments from China will weigh on Asian refining margins, particularly for diesel, as refiners' profit from producing the fuel from Dubai crude has already shed 15%-30% month-on-month amid sufficient regional supplies and a closed arbitrage to European markets.
Beijing's abrupt relaxation of COVID rules this week aren't likely to reverse the outflows as substantial recovery in local demand may take months to materialize, market participants said. Despite earlier expectations that part of the large set of quotas released in October could be extended into 2023, it became clear in recent weeks that refiners were being encouraged to finish them all by end-December, three trading sources said.
"Chinese refiners are still grappling with high domestic inventories, especially for gasoline and more recently gasoil," said Daphne Ho, senior analyst at consultancy Wood Mackenzie. "Healthier export margins has been a key push factor."
State refiners, which control most of the export quotas, have since November been ramping up diesel production to cash in lucrative overseas sales. Despite recent declines, refining profits for both 10 ppm sulfur gasoil and jet fuel have more than doubled this year on tight global supplies.
"State majors are very much margin-oriented and they will only redirect volumes if there is better profit elsewhere," said one China-based trading source. Gasoline exports were pegged at 2.1 million to 2.3 million tons for December, likely to surpass a record 1.9 million tons from April 2020.
We remind, Ineos has agreed a fourth joint venture with Sinopec that will see it take a 50% share in the Tianjin Nangang project, which is currently underway and due to go on stream at the end of 2023, said Chemanager-online.
“This latest joint venture with Sinopec significantly expands Ineos’ petrochemical production and business footprint in China. It is a further example of the close relationship and growing collaboration between Sinopec and Ineos,” said Ineos chairman and CEO Jim Ratcliffe.