China issues first batch of 2023 oil product export quotas at 27 mil mt

The Chinese government has issued around 18.99 million mt (151 million barrels) of export quotas for clean oil products and 8 million mt (50.8 million barrels) for fuel oil in its first batch for 2023, several sources with knowledge of the matter told S&P Global Commodity Insights Jan. 3.

With the new quotas, refiners are lifting their gasoil export volumes in January from their previous plans amid slow domestic demand recovery and positive exporting margin.

The clean product quotas for exporting gasoline, gasoil and jet fuel are higher by 46% from 13 million mt issued in the same batch for 2022 with Sinopec as the top quota holder as usual. Overall, the total allocation in 2022 was 37.25 million mt.

However, "the increase is unlikely to tell the trend of China's exports in 2023 as it is unclear when the second batch will be allocated and how big the volume for this year will be. We currently estimate clean product outflows in 2023 are more or less flat to 2022," said Sun Sijia, an analyst with S&P Global.

Fuel oil export quotas also jumped 23.1% from 6.50 million mt in the same batch for 2022. This allocation reached almost half of the 16.75 million mt for the whole year of 2022 as Beijing encourages the sales of low-sulfur fuel oil for bunkering at Chinese bonded ports.

Meanwhile, sources said the remaining export quotas for 2022 are allowed to be consumed in the first quarter of 2023, lifting their availability higher than the new allocations.

No document about the allocation was available yet, and the actual volume may slightly differ from the sources' reported figures.

Fresh quotas to boost Jan exports

In January, several sources with exporting refineries told S&P Global that they will lift clean oil product exports with the fresh quotas from their original plans.

Due to limited quota availability in end-December, China was estimated to slash clean oil product exports to about 3 million–4 million mt in January from about 6 million mt in December, information collected by S&P Global showed.

Two refining sources based in Liaoning province and Zhejiang province, respectively, said they will hike gasoil outflows as the exporting margin was at around $30/b, higher than that of gasoline.

Meanwhile, domestic demand for gasoil slowed down as industrial, construction activities wind down ahead of Lunar New Year. But gasoline demand in China is likely to rise for travels for LNY as the number of new COVID-19 cases may have peaked in this wave, analysts said.

Sinopec's Zhenhai Petrochemical & Refining is to raise its January exports by 50% to 120,000 mt from the original plan of around 80,000 mt, a source closed to the refinery said.

"Gasoline stock is a bit high, while domestic demand remains relatively weak. We are thinking to export more gasoline with the quotas," said a source with PetroChina's Dalian Wepec.

PetroChina's Wepec in late December planned to cut its exports by 64.6% on the month to 105,000 mt of gasoline and 40,000 mt of jet fuel in January. The export-oriented refinery shipped 130,000 mt of gasoline, 120,000 mt of jet fuel and 160,000 mt of gasoil to overseas in December.

PetroChina's Dalian Petrochemical previously planned to export a total of 310,000 mt of gasoline, gasoil and jet fuel, falling 41.5% from 530,000 mt planned for December.

"We'll likely increase exports January, but need to be nodded by the headquarters," said a source with Dalian Petrochemical.

China's clean oil product export quota allocation (million mt)

Note: Volume may slightly be different from the actual ones

*All CNAF's quota is for jet fuel

China's fuel oil export quota allocation (million mt)

Source: market source