China releases 12.8 mil mt clean oil products, 5.2 mil mt LSFO export quotas in second batch for 2025

China's Ministry of Commerce issued its second batch of export quotas for clean oil products and low sulfur fuel oil, amounting to 18 million mt, sources with knowledge of the matter told Platts, part of S&P Global Commodity Insights, on March 28.

In this latest allocation, about 12.8 million mt of quotas were designated for the export of gasoline, gasoil and jet fuel, while the remaining 5.2 million mt were allocated for LSFO, according to the sources.

The combined quota volume of 18 million mt remained unchanged from the second batch allocated in May 2024, which consisted of 14 million mt for clean oil products and 4 million mt for LSFO.

The new allocation brought the LSFO quotas for 2025 to 13.2 million mt across the first two batches, marking a 10% increase year over year.

The higher export quotas for LSFO have also allowed them to be used for marine gasoil exports due to an adjustment in HS Code in 2025, bunker fuel suppliers said.

Starting Jan. 1, 2025, the HS Code 27101929 that classifies marine gasoil was combined with that of LSFO 27101922 into a new one of 27101924.

As a result, MGO also needs quotas to be exported from 2025.

An analyst with JLC said roughly 100,000 mt of MGO can be exported each month, translating to an annual amount of 1.2 million mt, which explained the incremental volume of LSFO.

"The margins for exporting LSFO is not that good, so the increased exports quota may fail to support higher exports in the coming months," said a Beijing-based analyst.

A PetroChina refinery source agreed that the margins for exporting LSFO can barely make ends meet.

Export margins

China exported a combined 4.08 million mt of gasoline, gasoil and jet fuel in the first two months of the year, down 27.4% from a year earlier, according to customs data released by the General Administration of China.

The export margins for both gasoil and gasoline has been in the negative territory, with gasoil at a loss of around $1/b and $3.50/b for gasoline, according to the Beijing-based analyst.

"The margins have been improving a bit following the higher crude prices recently, so we might export more for April with the new quotas," said a source with Norinco's Huajin refinery in northeastern China.

The refinery has received around 160,000 mt of export quotas in the new round and will likely increase its gasoil exports from the initial one MR-sized cargo to two, the source added.

The export margins for jet fuel should be the best of the three clean oil products, which was about Yuan 300/mt higher than those of gasoline, according to a state refiner source.

Jet fuel has been the most popular barrel for exports as it is priced against a monthly average of the Mean of Platts Singapore jet fuel/kerosene assessments, changing in line with international prices.

Meanwhile, jet fuel, which was mostly exported via the processing trade route, was less affected because of the new rules on value added tax than gasoline and gasoil, which were normally exported via general trade route, sources said.

Upon the allocations of the new round quotas, a PetroChina refinery in northeastern China will boost its jet fuel exports by 33.3% to 160,000 mt in April from around 120,000 mt for each month over the first quarter.

Processing trade quotas higher

In the latest round, 4 million mt of oil products export quotas were allocated for processing trade, down 33% from 5.95 million mt in the first batch of 2025.

The latest allocation brought the total quotas under processing trade to 9.95 million mt so far, up 116% compared with the first two batches in 2024.

The increase, which was within expectations, reflected the need for quota holders to save export costs by $3-$4/b under the new VAT rebate regulation effective Dec. 1. 2024.

Among this, about 6.8 million mt, or 68% of the total goes to Sinopec, which was a major exporter of jet fuel under the processing trade route.

Some Sinopec sources said the VAT rebate cut mainly affects exports under the general trade route, typically cargoes shipped overseas, while clean products exported under the processing trade route, also known as the tolling trade route, will remain tax-free and exempt from the new policy.

China's second batch of 2025 clean oil products export quotas:

(million mt)

China's second batch of 2025 fuel oil export quotas:

(million mt)

Source: Market sources