China lifts gasoil exports to offset inventory pressure amid weak domestic demand
Chinese refiners significantly lifted gasoil exports in February to above 2 million mt in order to offset inventory pressure amid weak domestic demand, with the higher exports helping to meet regional gasoil demand rebounds.
China’s five oil product quota holders — Sinopec, PetroChina, CNOOC, Sinochem, Zhejiang Petroleum & Chemical and Norinco — planned to export about 2.1 million mt of gasoil in February, which would be a four-month-high level since hitting 2.17 million mt in October, market sources said in the week Feb. 8-11.
At least three refineries, which have skipped gasoil exports in January, planned to resume the outflows in this month.
These include Sinopec’s Fujian Refining and Petrochemical, PetroChina’s Liaoyang Petrochemical, and Norinco Huajin refinery, which together plan to export 200,000 mt of gasoil in February.
A source with Norinco Huajin said the refinery has to cut gasoil stocks during Lunar New Year holiday, when demand for the industrial and transportation fuel will be low.
Norinco Huajin initially had planned to export 40,000 mt of gasoil in February and subsequently doubled the volume to 80,000 mt.
Several refiners across China told S&P Global Platts that their gasoil sales have been slow down so far this month from January levels, leading to high inventories.
“As the slow sales to carry on, our storage space could only store about 15 days production,” a central-China-based Sinopec refiner said and added the company had to find outlets for the barrels to keep their throughput stable.
China’s gasoil demand has gradually slowed down since around Jan. 28, when the spring travel rush started prior to Lunar New Year due to suspension in construction, industry and transportation sectors.
S&P Global Platt Analytics forecast China’s gasoil demand to fall 11% in February to 3.6 million b/d from 4.1 million b/d in January, according to its China Oil Market Forecast dated Feb. 5.
Regional gasoil demand rebound
The heavier outflow from China is likely to meet buying interest rebounds in Asia Pacific.
Strong buying interest and emerging pockets of demand are bolstering the Asian gasoil market in February, with traders saying that regional requirement from Myanmar and Vietnam in addition to steady demand from Australia has resulted in the pace of price recovery in Asia outpacing that in Europe.
The Singapore March-April gasoil timespread was steady at a seven-month-high of plus 17 cents/b at the 0830 GMT Asian close Feb. 10, S&P Global Platts data showed. In contrast, the timespread was assessed at minus 16 cents/b on Jan. 11.
“Asian gasoil balance could see further tightening over the next few months with upcoming refinery maintenance, which could see some operators opt for earlier and longer turnarounds due to the depressed margins. Several refineries such as ENEOS Mizushima and Chiba have announced CDU shutdowns lasting up to four months starting in February,” Platts Analytics said in another report dated Feb. 5.
Jet fuel, gasoline
For other products, Chinese refiners said their jet fuel inventories were surging as demand slumped during spring travel rush period due to governments’ call for celebrating Lunar New Year locally instead of going home.
The Ministry of Transport’s latest data showed that the number of passengers traveling by air was at 683,000 on Feb. 9, dropping 63% from the same lunar calendar day in 2019 and 65% from 2020.
Platts analytics projected China’s jet fuel demand to fall 15% month on month to 650,000 b/d in February and exports to rise by 13% to 230,000 b/d, according to its China Oil Market Forecast dated Feb. 5.
Meanwhile, domestic gasoline sales were steady compared to January, resulting in stable export plans at around 1.5 million mt, Chinese refiners and market sources said.
MOT’s data showed that 27.59 million cars ran on the country’s highway on Feb. 9, edging up 0.8% from Feb. 8 and 0.4% from the same lunar calendar day in 2020.