China's Higher Refinery Runs May Boost Diesel Exports to Record

  • Crude refining rises to 10.48 million b/d, highest since June
  • Diesel exports may surge to record to alleviate high inventory

China’s diesel exports may surge to a record in the coming months as refinery output increases while domestic demand growth for the fuel slows.

The nation’s diesel shipments might have risen to a record last month, topping the previous high in June of 670,000 tons, and may climb to 1 million tons a month in the fourth quarter, according to ICIS China, a Shanghai-based commodity researcher. China is scheduled to release August diesel export data next week.

Refiners processed 44.34 million metric tons of crude in August, up 6.5 percent from a year earlier, data from the Beijing-based National Bureau of Statistics showed Sunday. That’s about 10.48 million barrels a day and 1.8 percent higher than July as production increased to satisfy growing demand for gasoline.

“Diesel exports will continue to rise amid a supply glut created by high oil processing to meet robust gasoline demand,” Lin Jiaxin, an analyst with ICIS China, said by phone from Guangzhou. “The public holiday breaks early this month and in October will boost traveling and demand for gasoline, while diesel use will remain very weak.”

Slowing industrial production and investment growth in the world’s second-largest oil consumer are curbing demand for diesel, which is used in the construction and transportation sectors. Industrial output rose 6.1 percent in August from a year earlier, missing an estimate of 6.5 percent. Fixed-asset investment, excluding rural households, climbed 10.9 percent in the first eight months, the least since 2000.

Diesel accounts for more than a third of China’s oil consumption, and the so-called apparent demand for the fuel slumped to about 3.47 million barrels a day in July, the least since August 2014, according to data compiled by Bloomberg. Meanwhile, gasoline demand was near a record 2.73 million barrels a day in the same month, up 17 percent from a year earlier.

China’s gasoline demand is forecast to grow around 10 percent this year while diesel use may climb 0.7 percent, Vienna-based consultant JBC Energy GmbH said in a report Monday.

“China faces one of the worst situations in terms of demand mismatch in Asia,” researcher Energy Aspects said in report this month. “Its domestic gasoline demand is soaring, but its refineries cannot produce enough gasoline without spewing out large quantities of unwanted diesel.”

— With assistance by Jing Yang

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