China’s gasoline, gasoil exports to continue as COVID-19 hits domestic demand

China’s oil companies are likely to continue exporting gasoline and gasoil in April to ease bulging inventories at home, as the resurgence of the COVID-19 pandemic takes a toll on domestic demand, market sources told S&P Global Commodity Insights on March 28.

Market sources said refiners may not have much option other than shipping cargoes overseas, and the supply situation has changed, since an earlier request by the country’s National Development and Reform Commission to temporarily suspend gasoil and gasoline exports, amid a rise in international oil prices.
However, China’s anticipated exports of gasoline and gasoil in April at 416,000 mt and 140,000 mt, respectively, will be lower than March levels of around 500,000 mt for each product.

Initially, Sinopec, the leading exporter of gasoline barrels, was expected to export around 230,000 mt of the transport fuel, according to market sources

“Stocks of gasoline have stayed relatively high over the past few weeks due to the resurgence of COVID-19,” said a trade source in eastern China.

Stocks of gasoline at China’s independent refineries have climbed by about 3 percentage points on the week as of March 24, or 87,300 mt, compared with a week-on-week increase of 2 percentage points as of March 17, according to a local energy information provider.

Although independent refineries have been marginal suppliers, they have often responded quickly to market changes.

China’s daily number of confirmed COVID-19 cases had risen to over 1,000 since March 12, standing at 1,219 March 27, according to data from the National Heath Commission. This has resulted in movement restrictions across 20 provinces and municipalities, including populated cities like Shanghai and Jilin province, sending nearly 30 million people into lockdowns, with epicenters of the outbreak accounting for around 30% of China’s oil consumption in 2021, according to S&P Global.

Shanghai, which is China’s on of the most populated cities and a consuming center of oil products, has decided to undergo a lockdown in two phases over March 28-April 5 to control an outbreak of the highly infectious omicron variant of the coronavirus.

Oil demand drops at home
As China witnesses a rising number of cases, oil demand is expected to drop by 650,000 b/d and 400,000 b/d in March and April, respectively, according to S&P Global.

“The oversupply issue may ease a bit when Sinopec and PetroChina’s maintenance period kicks in during April, which will cap oil product exports in the month,” a Beijing-based analyst said.

Sinopec has shut 564,000 b/d of its refining capacity since mid-March for scheduled maintenance, while PetroChina will shut its 110,000 b/d Liaohe Petrochemical refinery for maintenance from early April.

Market sources said PetroChina will continue to export gasoline in April, a shift in its plan from a few weeks ago when it had no plans to export the transport fuel next month. Previously, the company only planned to export jet fuel.

One of its major exporter refineries in Dalian of northeastern Liaoning province has updated its export schedule with a plan to ship out 32,000 mt of gasoline in April, given the changing market situation. Prior to this, the refinery had only planned to export one jet fuel cargo, same as another of PetroChina’s refineries in southern China.

“Stocks of gasoline have been high because of the pandemic,” said another refinery source in northeastern Heilongjiang province.

Refiners scramble to adjust export plans
Private refining complex Zhejiang Petroleum & Chemical will export at least 114,000 mt of gasoline in April, according to market sources.

According to a company source, the company will try to boost product exports by sending out gasoil cargoes to the overseas market.

Sources said ZPC is likely to trim down its refinery runs in April due to poor petrochemical margins, which will reduce its oil product output. Its run rate in March was more or less stable month on month at around 89%, compared with 88% in February.

Meanwhile, Sinochem, is likely to update its gasoline export plan, by adding 40,000 mt of the barrels into the outflows in April, according to market sources.

The state-owned firm is expected to be the lead exporter of gasoil in April, with at least 100,000 mt of the fuel from its Quanzhou Petrochemical in Fujian and ChemChina’s refineries in Shandong, market sources said. The April gasoil outflow estimates have been raised from 80,000 mt a few weeks ago.

In addition to this, Sinopec Tianjin Petrochemical is also expected to export 40,000 mt of gasoil in April, according to a company source.
Source: Platts