China may extend refined fuel export quota to next year

© Reuters. Oil and gas storage tanks are seen at an oil depot at a port in Zhuhai, China October 22, 2018. REUTERS / Aly Song

By Chen Aizhu and Jing Xu

SINGAPORE/BEIJING (Reuters) – China may revise its proposal to sharply increase its refined fuel export quota for this year by extending the plan to next year, as it weighs the benefits to its economy. Exports are higher than domestic reserves are low and operational challenges, four sources told Reuters.

However, four sources with direct knowledge of the matter – and three others – said the government was still looking into the matter.

The market has been expecting China to introduce a fifth batch of fuel export quotas of up to 15 million tons for the rest of the year, which will be the largest quota so far in 2022 and lift exports. of China is declining.

Proposals from refineries’ planning departments, following calls by the government to boost trade, have prompted some refiners to be willing to increase output to take advantage of the quota.

However, four sources said Beijing could extend the deadline of the proposed 15 million tonnes to next year to lessen its impact on the global market and avoid falling prices.

The National Development and Reform Commission, China’s powerful economic planner, held a meeting with the nation’s major refineries earlier on Wednesday, sources said. news said. It was not immediately clear whether the meeting reached a decision.

The meeting reviewed the companies’ oil businesses and their production capacity this year, and discussed the global oil market outlook for 2023, the four sources said.

“The government believes that domestic refineries are operating at a low level this year due to weak domestic demand and the negative impact of COVID-19 control measures,” one of the sources said.

“Increasing quotas can help boost exports in general and also help refineries increase production volumes,” the person added.

The global oil market was supported by China’s fuel exports plummeting for most of the year.

However, the proposed large number of export quotas caused Asian refiners’ profit margins for diesel, jet fuel and gasoline to fall two weeks ago, although the average distillates The tank has recovered somewhat.

The proposed volume is meant to be up 63% from the 24 million tonnes released so far in 2022, too large to be realistic and risks impacting refineries’ profitability, officials said. at state refineries said.

“This rumored scale is simply not feasible,” said a Beijing-based state official involved in refinery production planning.

“Refiners need two to three months to purchase, so you might miss the best export opportunity,” the official said, adding that the oil inventories were His company’s crude and refined products were at “below normal” levels.

The sources declined to be named because they were not authorized to speak to the press. China’s Ministry of Commerce and the NDRC did not immediately respond to requests for comment.

Quotas are normally allocated to China National Petroleum Corporation, China Petrochemical Corporation, China National Petroleum Company, Sinochem Group, China National Aviation Fuel Company and refinery. Private Zhejiang Petrochemical Corp.

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