China could lower its fuel exports again in October, potentially tightening the global fuel market further, as domestic gasoline and diesel inventories have slumped to multi-year lows.
China’s fuel exports recovered in August as refiners exported 6.01 million tons of petroleum products, up by 12.7% from a year earlier, after Beijing removed in mid-July restrictions on fuel exports that were in place at the peak of the Strait of Hormuz blockage.
The total volume of Chinese fuel exports exceeded pre-war levels last month, with jet fuel exports at an all-time high. Overseas shipments are set to remain strong in September, too.
But October exports could be lower due to the seven-year-low gasoline and diesel inventories in China, GL Consulting, a consultancy owned by MySteel, said this week.
China has not yet announced the fuel export plans for October.
However, with “domestic supply already relatively constrained and internal demand strengthening, refiners are likely to prioritise the domestic market,” GL Consulting said.
“This should reduce refined product exports in the near term, effectively redirecting barrels that would otherwise have been shipped overseas back into the domestic balance.”
Chinese fuel inventories are tight and likely to remain such through the end of October, as demand is being supported by the recent surge in fuel exports and firm domestic fuel demand, according to the analysts.
On the one hand, China’s fuel exports soared in July–September, drawing additional barrels out of the domestic market. On the other hand, peak summer travel supported domestic gasoline demand, while autumn harvesting and pre-season restocking ahead of the traditional September–October peak underpin diesel consumption, GL Consulting noted.
“This is not simply an inventory story: it is a supply-demand balance story, with refinery availability and export flows likely to determine how long the tightness lasts,” the consultancy said.
Reduced fuel exports from China could exacerbate the global fuel crunch created by the constraints in the Middle East and Russia. The tightening fuel markets have pushed refining margins and retail fuel prices to record highs in many markets, including in the United States.
By Charles Kennedy for Oilprice.com
