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China likely to lift March gasoline, gasoil outflows as export margins rise

Chinaese oil companies are likely to lift March oil products outflows above their planned targets as export margins rise, refiners and analysts told S&P Global Commodity Insights March 3.

The country’s oil products export quota holders late-February set total gasoline exports for March at 520,000 mt, down 48% from the February target and one-third of 1.56 million mt in March 2021, according to sources with knowledge of the matter.
Wholesale price of 92 RON gasoline was offered at Yuan 9,250/mt in South China’s international trading hub Guangzhou Feb. 21, according to market sources. Oil companies usually set export volumes for March late-February.

The price equated to $112.36/b before taxes and fees, 5.2% higher than the 92 RON gasoline FOB Singapore cargo price of $106.83/b on the same day, S&P Global data showed.

The increase in Chinese domestic gasoline price, however, lagged Singapore price, suggesting a window for export profit was open.

Platts unleaded 92 RON gasoline FOB Singapore cargo price jumped to $122.7/b March 2 and was $4.29/b higher than Guangzhou’s wholesale market offer price of $118.41/b before taxes and fees.

It means the spread between Singapore and Guangzhou prices was at $36.47/mt, suggesting that exports could gain an extra profit of $15.8/mt than selling in the domestic market, considering a freight rate for an MR-size cargo to Singapore at $20.67/mt, according to S&P Global data.

“Theoretically, oil companies will upward adjust exports this month to enjoy better profit,” a source with China’s private refiner Zhejiang Petroleum and Chemical said.

The company late-February set its March gasoline exports volume at 114,000 mt, less than half of 285,000 mt in February, sources with knowledge of the matter said.

China’s leading gasoline exporter, state-owned PetroChina, was however unlikely to raise its March outflows significantly from the original plan, due to limited quota availability, refining sources with the company said. The oil giant in February slashed its March export volume by 79% on the month to 80,000 mt.

“Due to the significant export quota reduction, oil companies need to be cautious when making exports decisions to maximize export profit and balance domestic market supplies,” a Singapore-based analyst said.

Beijing cut the first batch of oil products export quota allocation by 56% year on year to 13 million mt for 2022, S&P Global reported earlier.

The country’s March gasoil outflows are also expected to surpass the initial planned volumes of about 500,000 mt, which is more than double that of about 200,000 mt in February, market sources said.

Platts 10 ppm gasoil FOB Singapore cargo price reached $129.74/b March 2. It was $7.03/b, or $52.39/mt, higher than Guangzhou’s wholesale price of $122.71/b before taxes and fees on the day. The $52.39/mt difference was high enough to cover freight of $20.67/mt.

On Feb. 21, Platts 10 ppm gasoil FOB Singapore cargo price was at $108.49/b, $6.41/b lower than Guangzhou’s wholesale price of $114.9/b.

“Gasoil sales are slightly slower than gasoline, as factories are just resuming operations from Lunar New Year holidays,” a Guangdong-based source with PetroChina’s sales division said.

That has resulted in more barrels available for export.

State-owned Sinopec is expected to lead the country’s gasoil exports in March according to the initial export plan and ship 370,000 mt overseas, up 429% from 70,000 mt in February.

Sinopec’s Shanghai Petrochemical will resume its gasoil exports in March and load 60,000 mt, a company source said.

Sinochem, another Chinese state-owned company, is likely to export 80,000 mt of gasoil from its Quanzhou refinery in the Fujian province in March. The company’s gasoil outflow from its ChemChina refineries in the Shandong province was likely to be 40,000 mt in February.

Norinco’s Huajin refinery will export 40,000 mt of gasoil barrel in March, following 84,000 mt in February and no outflows in January, a source with the refinery said.
Source: Platts

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