SINGAPORE (Reuters) - China’s gasoline and gasoil exports are set for a strong rebound in July and August, industry sources said, as companies make the most of rising global fuel demand and higher prices to pare back growing fuel inventories.
Fuel exports from Asia’s top gasoline and third-biggest gasoil exporter fell 50% in May and stayed weak in June. But now that an easing of coronavirus lockdown restrictions is boosting economic activity, fuel demand and prices, exports are poised to rise rapidly.
This will add supply pressure on the international fuel market, which has been struggling with subdued demand owing to the pandemic.
Refiners produced a record amount of fuel in June, after importing record volumes of crude for two months running, to satisfy growing demand as the Chinese economy gradually reopened after lockdown. While China’s diesel appetite typically slows in the third quarter, refineries are making the most of higher oil prices LCOc1 above $43 a barrel to get rid of excess fuel.
“With very significant inventory build-ups in recent months, we expect Chinese clean product exports to return to first quarter 2020 levels (in the near term),” said Philip Jones-Lux, energy market analyst at JBC Energy.
Graphic: China crude oil imports vs fuel exports - here exports CNC-GASLNE-EXP are expected to soar by 44% to about 1.1 million to 1.2 million tonnes (300,000-327,000 barrels per day) in July from June, according to consulting firm FGE and an industry source who tracks the fuel.
Volumes could rise further in August to a four-month high of 1.5 million tonnes, FGE added.
The record amounts of crude oil China imported in May and June, according to customs data, suggests the forecasts for gasoline and gasoil exports have room to be revised higher still. China received 47.97 million tonnes of crude in May and 53.18 million last month, bought on the cheap when crude prices fell below $20 a barrel in April.
Graphic: China Fuel Exports - here gasoil exports CNC-DIESEL-EXP could jump by at least 15% in July to between 1.2 million and 1.3 million tonnes (290,000-315,000 bpd) from June, according to estimates from Refinitiv Oil Research and FGE respectively.
Exports could rise in August to 1.6 million to 1.65 million tonnes, FGE and energy consultancy Energy Aspects said respectively.
Graphic: Asia refining margins July 2020 - here
Still, the recovery in global fuel demand helping to underpin Chinese fuel exports could be capped by a second wave of coronavirus infections, which has prompted countries in Asia to impose fresh restrictions.
“Gasoline demand has improved to pre-pandemic levels in numerous countries, supporting the recent stock draws,” said analysts at FGE.
“That said, the re-emergence of a second wave of COVID-19 outbreaks casts a shadow over the recovery in demand.”
Reporting by Seng Li Peng and Koustav Samanta; Editing by Florence Tan and Ana Nicolaci da Costa