Chinese authorities are expected to give much lower fuel export allowances to refiners in the second batch of quotas in the coming weeks amid rising domestic demand, a Reuters survey of state refiners and consultancies showed on Thursday.
Following a rather generous first batch of export quotas early this year, when a total of 18.99 million tons in allowances were issued, China is now set to limit quotas in the second batch to between 8 million tons and 12 million tons, according to the survey.
In the first batch, China increased its fuel export quotas by as much as 46% compared to the first batch of 2022, as authorities sought to keep refining output high amid sluggish domestic demand. Major state refiners and some of the largest private processors, such as Zhejiang Petrochemical, are typically given fuel export quotas several times a year, with deadlines to use up the allowances.
It is not clear yet when China will issue the second batch of quotas for 2023. Last year, China announced the second batch of fuel export allowances in June.
With demand rising from the second quarter and Chinese economic growth beating expectations in the first quarter of 2023, the need to spur the economy through oil products has declined.
“Refineries will be granted around 10 million tonnes of new export quotas in coming weeks, as they could use over 80% of 2023 quotas by the end of April,” Energy Aspects analyst Sun Jianan told Reuters.
With the potentially lower export quotas for the summer period, refining margins across Asia could rise again, following a period of weaker margins in recent weeks. Domestically, the biggest Chinese refiners are set to benefit from the rise in demand, which has improved margins in China.
Economists expect China to account for around half of global oil demand growth this year.