CHINA DATA: 2021 oil products exports drop 12%, more cuts loom

China's combined exports of gasoline, gasoil and jet fuel in 2021 fell by 11.9% year on year to 40.31 million mt, data from the General Administration of Customs showed on Jan. 18, setting the stage for further cuts in 2022 as the country's tight quota allocation targets loom.

The country's oil product exports have shown a persistent decline, dropping by 17.4% in 2020 from the peak of 55.36 million mt in 2019 due to better domestic demand as the coronavirus pandemic engulfed countries worldwide.

The plunge in China's 2021 oil products exports reflected Beijing's move to slash oil product export quotas, a trend that is also likely to continue in the coming years as China advances towards its net-zero journey.

The government in 2021 capped oil product export quotas at 37.61 million mt from 59.03 million mt for 2020.

In the first batch of export quotas for 2022 issued recently, refiners have been allowed to export 13 million mt of gasoline, gasoil and jet fuel in 2022, down 56%, or 16.5 million mt, from the same batch in 2021.

Analysts expect China's 2022 total oil product exports to plummet by 25%-45% from 2020.

GAC's 2021 exports figure of 40.31 million mt was, however, 2.7 million mt higher than the quota volume for 2021 because the data includes re-exported barrels, which are imported and stored in China's bonded storage.

Export quotas are not required when sending out these cargoes overseas, sources with knowledge about the matter said.

Recovery for jet fuel exports

Aviation turbine fuel contributed to the drop in the oil products commodity complex, with outflows falling 14.2% on the year to reach 8.56 million mt in 2021. This comes despite jet fuel registering a 36.5% year-on-year jump to hit 590,000 mt in December.

The drastic decline in China's jet fuel exports in 2021 came as countries culled flights and imposed travel restrictions to curb the spread of the virus. The emergence of new coronavirus variants also added to the pandemonium.

However, jet fuel exports are expected to recover as vaccination gathers pace worldwide and countries impose lesser movement checks.

"Flights outside of China are expected to recover more quickly than in China, where the zero COVID strategy will remain in place," S&P Global Platts Analytics said in a Jan. 7 report, suggesting that China's share of jet fuel exports could rise among the three oil products.

Platts Analytics expects China's 2022 jet fuel exports, including those for bonded refueling in China's international airports, to edge up 7,000 b/d on the year to 194,000 b/d.

Gasoil exports stay weak

China's gasoil exports in December slumped 78.1% to 330,000 mt in December, taking the country's 2021 gasoil outflows to 17.21 million mt, a fall of 12.9% compared to 2020.

December exports were lowest since March 2015, when the volume stood at 300,000 mt.

The reduction in gasoil exports came due to the tight export quota, and a decline in domestic supplies as refineries cut their gasoil yield until about September while blenders reduced light cycle oil imports as blending stocks since June.

Beijing introduced a consumption tax on imported LCO, restricting its availability, Platts reported.

Chinese refineries have the flexibility to adjust their gasoil output while blending material imports will likely continue to stay low. Platts Analytics estimated China's gasoil outflows to decrease by 245,000 b/d in 2022, representing a year-on-year reduction of over 30%.

The proportion of gasoil outflows among the three major oil product exports might fall to around 40%, Platts Analytics said. Gasoil's share stood at 57% in the key oil products exports in 2021, GAC data showed.

Gasoline exports to stay subdued

China's 2021 gasoline outflows witnessed the least year-on-year declines, dropping 9.1% to 14.54 million mt, according to GAC data.

China's oil companies exported 940,000 mt of gasoline in December, tempering the declines during the rest of the year. December gasoline outflows were up 16.3% month on month, making it the only product to see a month-on-month rise in December.

The private refining complex, Zhejiang Petroleum & Chemical, was a major contributor to this recovery. According to its initial export plan, ZPC's gasoline exports in December went up by a third to around 400,000 mt from November, after the facility boosted its crude throughput.

Platts Analytics expects gasoline exports to decline by around 37% year on year to 210,000 b/d in 2022, while domestic gasoline demand will stay strong. Gasoline exports in 2022 will see deeper cuts compared to gasoil outflows that will be supported by a recovery in the demand for middle distillates in the Asia-Pacific region.

China's key oil products exports ('000 mt)

Source: General Administration of Customs

Notes: * was adjusted according to the % change provided by the GAC.