China oil refiners will be able to ease a tight global fuel supply after Beijing issued a third round of petroleum-product export quotas.
The new quotas cover 5 million tonnes of refined fuel and 2.5 million tonnes of low-sulphur fuel oil (LSFO).
The quotas, issued earlier than expected, will bring this year’s total refined fuel export quotas to 22.5 million tonnes, 39% less than the first three allotments last year, and total LSFO to 12.25 million tonnes, up 11%.
Seven companies received new refined fuel export quotas: China National Petroleum Corporation (CNPC), China Petroleum & Chemical Corp (Sinopec), China National Offshore Oil Corporation, Sinochem Holdings, China National Aviation Fuel, Zhejiang Petroleum & Chemical Co (ZPC) and China North Industries Group Corporation.
CNPC, Sinopec, Sinochem and ZPC received LSFO quotas.
Refiners Lobbying Beijing
China oil refiners have been lobbying Beijing to increase export quotas so they can benefit from record-high fuel prices in Asia and improve their balance sheets amid soaring crude oil prices.
Retail gasoline and diesel prices in China are capped by a pricing system that moves prices modestly once global oil breaches $80 a barrel.
Benchmark Brent crude has hovered above $110 since May. Swelling product inventories and stunted fuel consumption in China due to Covid-19 lockdowns have also discouraged refiners from ramping up production.
Traders said 5 million tonnes might not help refiners much in easing domestic inventory pressure, nor would it greatly alleviate supply tightness in the global market.
Global demand is recovering with the fading of the pandemic, and supply is limited by sanctions on exports of Russia’s refined products.
“It might be not much, but it’s good enough for refiners to seize the chance to make some money at this red hot market,” a China oil trader said.
- Reuters, with additional editing by George Russell