China issues second batch of oil product export quotas

Market: Oil products
06/05/20

China has issued its second batch of oil product export quotas for this year, again restricting exports to state-controlled firms.

The government has granted 28.03mn t of export quotas in the latest batch, 39,000t more than in the first batch that was issued at the end of last year but down by 470,000t compared with the second batch in 2019. A breakdown by gasoline, diesel and jet fuel has not been announced.

The government has now awarded 49.18mn t of quotas in the two batches this year, up by 3.89mn t or 8.6pc from the first two awards last year. China issued a total of 55.89mn t of quotas in 2019.

The quotas cover both general trade and exports under third-party processing deals. The general trade quotas total 24.63mn t, up by a slight 79,000t on the first batch and 840,000t higher than a year earlier. The quotas have been awarded to five state-controlled companies - Sinopec with 10.47mn t, PetroChina with 8.53mn t, SinoChem with 2.72mn t, CNOOC with 2.82mn t and aviation fuel distributor CNAF with 90,000t. Sinopec is the only company to have received a lower quota compared to the first batch, down by 490,000t.

Quotas granted for third-party processing deals total 3.4mn t, lower by 40,000t compared with the first batch and down by 1.31mn t year on year. The quotas are shared between Sinopec and PetroChina, with 2.6mn t and 800,000t respectively. CNOOC and SinoChem were awarded 100,000t and 140,000t in this year's first batch but were not included in the latest list.

Private-sector firms remain shut out of the clean product export market, even after Rongsheng's ZPC received a 1mn t bunker fuel export quota last month under a pilot project for the Zhoushan free trade zone. This award raised expectations that Rongsheng would be awarded more product export rights.

The product export quotas will help relieve oversupply in the Chinese domestic market, even as the export sector has been hit hard by the coronavirus outbreak. Persistently negative export margins are also limiting flows out of China, with Singapore spot gasoline prices having stayed below prices in Guangdong since early March. And exports are likely to remain under pressure in the second quarter, as global fuel demand is likely to remain subdued in the coming months as the Covid-19 pandemic continues.

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