Asian gasoline cracks to come under pressure as China set to lift end-2022 outflows

China is expected to export between 1.7 million mt (466,000 b/d) and 2 million mt (548,000 b/d) of gasoline in November and over 2 million mt in December, substantially higher compared with the 1 million mt it exported in October, analysts and market sources said Dec. 1. And should this happen, would likely exert downward pressure on regional gasoline crack spreads.

Asia's largest gasoline exporter is expected to further lift its gasoline outflows by the end of 2022 in a bid to support its economy by encouraging exporters to exhaust their remaining export quotas.

According to General Administration of Customs data, the country's gasoline exports stood at 662,000 mt in September, jumping 51.8% to 1 million mt in October.

"Chinese oil companies will try their best to maximize the usage of their oil product export quotas, in a bid to push up the country's total goods export volumes and economy performance," said Sun Sijia, an analyst with S&P Global Commodity Insights.

Beijing released 37.25 million mt of clean oil product export quotas in 2022. In January-October, China exported 23.2 million mt of gasoline, gasoil and jet fuel, the GAC data showed, leaving 14.05 million mt of quota yet to be used in November and December.

"To boost exports as an economic indicator and earn more US dollars, related government authorities may work together with the refineries to facilitate and smoothen the logistics, helping the volume to hit a record high," a Beijing-based analyst said.

China's domestic demand in November was weak amid tight movement restrictions, with capital city Beijing and manufacturing hubs Guangzhou, Chongqing under strict COVID control, while refining throughput was likely to hit a nine-month high. This would leave sufficient gasoline for export, market sources said.

Sun said the Chinese government may alter COVID-19 restrictions frequently, resulting in an erratic impact on domestic gasoline demand. She added that people in China would continue to prefer to stay home to avoid infection and private cars remain the choice mode of transportation given rigid travel guidelines.

Meanwhile, the country's estimated gasoline export volumes in 2023 remain subjected to next year's export quotas, which Chinese exporters are eagerly awaiting updates on, sources said.

Expectations of China continuing to export large volumes of gasoline moving forward could possibly bolster overall gasoline supplies and exert a downward pressure on cracks, industry sources said.

Several market participants also said that gasoline prices could also be weighed down by reduced demand from Malaysia following the end of the Nov. 19 general elections.

However, other market participants said Malaysia's gasoline demand could be bolstered amid the school holiday period.

Reflecting the softening sentiment, Platts-assessed front month FOB Singapore 92 RON gasoline swap crack spread against Brent swaps stood at 78 cents/b Dec. 1, down from $1.47/b on Nov. 30, S&P Global data showed.

The physical FOB Singapore 92 RON gasoline crack against front month ICE Brent crude oil futures was assessed at $2.07/b Dec. 1, down from $3.33/b at the Asian close Nov. 30.