China's April Clean Oil Product Exports Fall to 9-month Low of 2.27 mil mt
05.22.2023 By News - NEWS

May 22, 2023 [S&PGlobal]- China’s clean oil products exports in April saw the first year-on-year decline in 2023, falling 7.7% to a nine-month low of 2.27 million mt (605,000 b/d), data released by the General Administration of Customs showed late May 18.


Weak export margins would continue to cap China’s clean oil product outflows in May despite oil companies gaining new export quotas. But rising expectation of strong demand from the US during the driving season may widen gasoline crack thus encouraging Chinese refiners to lift outflows of the barrels in June, analysts and traders said.

The reduction in April was due to weak export margins and the intention of saving more barrels at home to meet strong demand during the five-day International Labor Day holiday in early May, analysts and market sources said.

The country’s monthly clean oil product exports had rose year on year in Q1 due to the low bases in 2022 when Beijing tightened the exporting access.

Therefore, the exports in January-April remained up 76.6% year on year to 15.16 million mt.

The April exports dropped 31.6% from 3.32 million mt in March, GAC data showed, and the exporting losses are expected to cap the outflows in May.

Export losses

“Exporting gasoline and gasoil make loss [of] about $7/b and $9/b in May, respectively,” said a Beijing-based analyst.

Meanwhile, two refining sources with Sinopec and PetroChina said they need to export more gasoline barrels due to the slightly higher stock and weaker demand than gasoil.

“Domestic demand for gasoil is not as good as expected due to a slow recovery among logistics and infrastructure segments, but sales remain better than gasoline,” a refining source with PetroChina said.

Market sources and analysts estimated gasoline exports to rise from 820,000 mt in April to a range of 950,000 mt and 1.3 million mt, while gasoil outflows to fall from 620,000 mt in last month to about 500,000 mt.

Sinopec’s main gasoil exporter Shanghai Petrochemical is set to export only 30,000 mt of the barrel in May, just one fifth of its peak export capacity of 150,000 mt.

Domestic gasoline sales dropped significantly after the National Labor Day holiday in early May amid a fall in road travel activity. Inventories were high due to strong stockpiling ahead of the five-day holiday, market sources said.

PetroChina’s leading exporting refinery Dalian Petrochemical plans to lift its gasoline exports by 150% month on month to 250,000 mt in May.

Widening gasoline cracks may boost June outflow

“Looking forward in June, Chinese refiners are looking for an opportunity to lift gasoline exports given their slower-than-expected demand at home and additional export quotas. As US gasoline cracks are projected to rise when it heads into the peak summer driving season, it could lift arbitrage incentives and lift gasoline cracks here as well,” said Shu Zhang, an analyst with S&P Global Commodity Insights.

The physical FOB Singapore 92 RON gasoline crack against front month ICE Brent crude oil futures averaged $9.23/b over May 12-18, up from the May 5-11 average of $8.02/b, S&P Global data showed.

“US gasoline stocks look tight (about 24 days of demand coverage presently), lifting US gasoline cracks, as gasoline demand is expected to rise into the driving season beginning on the Memorial Day weekend. Pump prices are lower compared with the elevated levels seen last year, though they are still much higher compared with pre-COVID levels. If the peak summer demand materializes and further lifting arbitrage incentives, we could see a seasonal boost to Asian gasoline cracks as well,” Zhang added.

At the same time, jet fuel demand has been recovering quickly from both domestic airlines and international airlines, according to refinery sources with PetroChina.

The country’s jet fuel monthly exports would be relatively stable at around 1 million mt, despite the volume down 25.9% on the month to 830,000 mt in April, analysts said.

Chinese refineries more than doubled jet fuel/kerosene production year on year to 3.53 million mt in April, although falling 6.6% from March, data from National Bureau of Statistics showed.

These come as Beijing in early May allocated 9 million mt (72 million barrels) of clean oil product export quota in the second batch allocation, bring the availability quotas to 15.16 million mt for May onward.

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