October 3 , 2022 [Global Times] – The need for winter heating in Europe has pushed up market expectations for European countries to increase imports of refined oil product from countries such as China. However, the volatility in global crude oil market will make Chinese refiners cautious toward lifting overseas sales, experts said.
While Europe used to rely on natural gas for heating, higher gas prices and restricted supply of natural gas are forcing them to turn to other energy sources, according to a report released by the CITIC Futures Research Institute.
The International Energy Agency (IEA) estimates that this switch will generate an additional 300,000-500,000 barrels per day (bpd) of refined oil demand this winter.
As the EU has struck a deal to ban most Russian oil imports, Europe has to look for other sources as it increases its imports, experts said, adding that China, with sufficient spare capacity, could be one of the sources.
China has an advantage in exporting refined oil products because it has excess capacity and high refining efficiency compared with other countries, Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times on Thursday.
In 2021, China’s refineries consumed about 700 million tons of crude oil, up 4.3 percent year-on -year, according to the National Bureau of Statistics. China’s consumption of refined oil products was 341.48 million tons, up 3.2 percent year-on-year, meaning that there is sufficient inventory and spare refining capacity.
Since September, China International United Petroleum & Chemical Co and other domestic traders have been actively hauling crude oil, raising the expectation of an increase in China’s refined oil export quota, Caixin reported.
Analysts from domestic brokers such as Changjiang Securities and Sealand Securities Co expect China to release another 15 million tons of refined oil product export quota in October, according to Caixin.
China’s fuel product exports rebounded in August as China issued more quotas in June and July.
Since the beginning of this year, the Ministry of Commerce has issued export quotas for refined oil products in three batches totaling 22.5 million tons, which is 40 percent lower than the total of 37.61 million tons issued in the tranches batches last year, according to the Ministry of Commerce.
However, since China needs to import crude oil for reprocessing and export, enterprises need to weigh the benefits to the economy of higher exports against operational challenges brought by volatility in crude prices, Lin said.
“At present, oil prices are high and domestic refineries face the risk of falling oil prices after refining,” Lin said.
Lin added that a main export market for China’s refined oil is Southeast Asia and companies have to closely monitor the profit, operational risks and the transport cost during the long term transport if it is to make shipments to Europe.
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