BEIJING: China controls oil product exports through quotas to state-run refiners after assessing domestic needs. Beijing has raised the initial volume of oil products that Chinese refiners can export this year, potentially adding to a supply glut just as new processing capacity in the Middle East is expected to pressure fuel prices and depress margins.
This year Sinopec Corp, CNOOC Ltd and PetroChina were given an oil product export quota of 9.75 million tonnes, up about 20 percent from the initial limit set for 2014, industry sources with knowledge of the matter said.
The refiners will likely apply for more allowances once they exhaust the initial quotas as they run cheaper crude through the capacity added last year, and the final annual exports are expected to far exceed the opening levels.
The first quota limit given to oil refiners in 2014 was for about 8 million tonnes, but by the end of the year China had exported 19.6 million tonnes of gasoline, jet fuel, diesel and naphtha, according to customs data.
With supply running ahead of domestic products consumption, increased exports from China is expected to exert some pressure on the regional cracks,” said Wendy Yong a senior analyst at oil consultancy FGE, referring to the profit margins for processing a barrel of crude into fuel.
China added more than 600,000 barrels a day (bpd) in refining capacity last year, bringing the nation’s total to near 14 million bpd.
The jump in Chinese exports is also coming just after new export-focused refineries have added 800,000 bpd of capacity at Yanbu and Jubail in Saudi Arabia, putting further pressure on Asia’s cracking profits.
