China’s oil refiners seek higher Q4 quotas

Source:Reuters-Global Times Published: 2017/9/3 18:53:39

Overall Chinese fuel exports from Jan to July up 8.5% year-on-year

China's State-owned oil refiners are seeking extra oil-product export quotas for the fourth quarter to reap higher overseas profits and off-load surplus supplies, three sources with knowledge of the matter said on Thursday.

Chinese State-owned refiners submitted their requests to the Ministry of Commerce (MOFCOM) two weeks ago, asking for extra quotas because some of them used up most of their allocated volumes in August, the sources said.

"We are requesting quotas to export more jet fuel and gasoline to meet demand in other parts of Asia," said one of the sources, an official from a State-owned refiner, who declined to be identified.

A ramp-up in Chinese fuel exports would be timely because of the opening of an arbitrage window to ship jet fuel from Asia to the US in the wake of Hurricane Harvey. The storm has shut a fifth of US oil refining capacity, triggering worries about a fuel supply crunch.

Refinery outages in the US could provide export opportunities even as US inventories remain high, said another of the sources, an official at a State-owned refiner.

The sources said that they are likely to receive the extra quotas, but they did not disclose their requested volumes. MOFCOM will issue the fourth-quarter quotas next month.

China's overall fuel exports during the January to July period were 8.5 percent higher than the same period in 2016 at 28.25 million tons, the General Administration of Customs has reported. Combined exports of products subjected to quotas - gasoline, diesel and jet fuel - were up 9 percent at 22.24 million tons.

The extra quotas could spur higher crude demand in the world's largest importer as the extra fourth-quarter allocation is filled.

The government has granted 32.365 million tons of fuel export quotas this year to State-owned companies including 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.

A gasoline crack spread  spiked to $15.63 a barrel as of Thursday, up from $8.56 on July 3. And a diesel crack has risen to $15.76 from $12.46 on August 22.

China controls export quotas every quarter to ensure sufficient fuel supplies for domestic needs.

The government has tightened export volumes this year after the companies did not use all of last year's allocation and because of environmental concerns, trade sources said. It is also set to keep in place a ban on fuel exports from independent refineries.

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