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China’s Diesel Net Exports Rise to 6-Month High on Record Quota

China’s net exports of diesel rose to the highest level in six months in October after refiners were granted record sales quotas.

Overseas shipments of the fuel exceeded purchases by 200,211 metric tons, according to data e-mailed by the General Administration of Customs in Beijing today. That’s about 48,600 barrels a day, the most since April, and more than triple net exports in September, the data show.

China, the world’s second-largest oil consumer, is shipping more diesel cargoes after the government increased export allowances for China National Petroleum Corp. and China Petroleum & Chemical Corp. (600028), its two biggest refiners. That’s meant to preempt a surplus in fuel supply as plants restart after seasonal repairs and upgrades, according to ICIS-C1 Energy, a Shanghai-based energy consultant.

“This quarter of the year usually is an off-season for maintenance, meaning there will be enough fuel supply domestically, thus the government approved a record quota for diesel,” Jean Zou, an oil analyst at ICIS-C1, said by phone from Guangzhou today.

The two refiners, which account for about 80 percent of nation’s total crude processing volume, were granted a combined diesel export quota of 1.7 million tons for the fourth quarter, ICIS-C1 reported on Oct. 25. They may only use as much as 30 percent of this allowance as domestic demand is forecast to increase by year end while the profit from selling to the Asian market is suppressed, according to Zou.

Diesel’s premium to Dubai crude in Singapore, Asia’s oil trading hub, dropped by 2.8 percent in October, the third decline in three months, according to data compiled by Bloomberg. The so-called gasoil crack spread, a measure of processing profit, has averaged $17.64 a barrel this year.

Fuel Oil

China’s net exports of gasoline fell to 323,666 tons last month, the least since July, according to the customs data. Net jet-kerosene exports climbed to a record 696,200 tons.

Imports of fuel oil, used by ships and smaller refineries known as teapot plants, increased to 1.69 million tons in October, the highest level in three months, the data show. Shipments in the first 10 months of 2013 were 20.8 million.

Venezuela remained the biggest fuel oil supplier to China after it shipped 381,441 tons last month. Russia shipped 224,956 tons, Singapore delivered 307,381 tons and Iran sold 177,246 tons.

To contact Bloomberg News staff for this story: Sarah Chen in Beijing at schen514@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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