Singapore — China’s February gasoline exports may fall a second straight month to hit their lowest in eight years as domestic consumption rebounds after the nation emerged from COVID lockdowns, industry and market sources said, likely buoying Asian refining margins.
Refiners in the world’s No. 2 oil consumer began scaling back refined fuel exports in January as local demand rebounded, reversing a surge in exports in the fourth quarter of 2022.
Lower gasoline exports from China will likely tighten regional supplies ahead of the peak summer driving season in northern hemisphere countries, driving refining margins in Asia upwards as buyers pay higher prices to secure cargoes.
China’s February gasoline exports were estimated at between 285,000 tonnes and 360,000 tonnes, down from an estimated 840,000 tonnes for January, according to two China-based consultancies and two trade sources.
This would be the lowest since gasoline exports of 224,000 tonnes in February 2015, Chinese customs data showed.
The exports have declined as road traffic in major Chinese cities recovered or surpassed year-ago levels, with migrant flows over the Lunar New Year festival period hitting a five-year high, real-time traffic data from Baidu showed.
Traffic is normal and there are no more restrictions, so domestic consumption of gasoline has been high during the annual Chinese New Year travel season, said Vortexa’s China oil market analyst, Emma Li.
Post-holiday commercial storage levels are also likely low, limiting export shipments, Li said.
Asia’s benchmark gasoline cracks have been trading above $10 a barrel since mid-January – a six-month high – mainly because of the drop in Chinese supplies and some opportunistic arbitrage demand from the United States.
China’s jet fuel seaborne exports may also fall in February to 400,000 tonnes versus around 500,000 tonnes in January, two other Singapore-based traders estimated.
Domestic demand is increasing with weekly air passenger figures exceeding 10 million from late January, the highest in at least 10 months, according to flight data provider VariFlight.
Last week, domestic air passenger numbers were at 86% of pre-pandemic levels, VariFlight said.
The resumption of international flights, however, will push up demand for refuelling airplanes at Chinese airports – counted as exports – lifting total February jet fuel exports to 1.83 million tonnes from 1.2 million last month, according to consultancy JLC.
DIESEL EXPORTS REMAIN ELEVATED
Meanwhile, Chinese diesel exports are expected to hold above 2 million tonnes, as seasonal domestic demand for the industrial and truck fuel remains lacklustre, according to consultancies Wood Mackenzie, Longzhong and JLC.
This will bring the combined February exports of diesel, gasoline and jet fuel to between 3.9 million and 4.15 million tonnes, about stable with January, according to the range of estimates from the consultancies.
China’s usual winter demand lull for diesel has led to limited domestic stocking up activities as well, with Chinese refiners having more incentive to ship the fuel overseas at better margins, said a China-based trading analyst.
The large export volumes will continue to weigh on Asian diesel margins, which have declined 18% in the past month despite concerns of tight supplies following the embargo and price cap on Russian refined products from Feb. 5.
Reporting by Trixie Yap, Muyu Xu and Chen Aizhu in Singapore; Editing by Tom Hogue – Reuters
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