China has announced fuel export quotas totaling 9 million tons for the final quarter of the year. The majority of these quotas are allocated for clean refined fuels, while 1 million tons are designated for bunkering fuel. Notably, state-owned refiners, including Sinopec, CNPC, and CNOOC, have received almost 6.4 million tons of this latest allocation.
This new issuance raises the total fuel export quotas for 2023 to 54 million tons, marking little change from the previous year’s figures. Chinese refiners are currently grappling with declining profit margins, with daily run rates dropping by 10% in August to 12.6 million barrels. In response to these economic pressures, refiners have reduced production to safeguard profits and have been building inventories at a rate of 3.2 million barrels daily—the largest monthly increase since 2015, as noted by ING commodity analysts.
August saw a significant drop in gasoline exports from China, plummeting 44% year-over-year to 770,000 barrels daily as export margins turned negative. By the end of August, refiners had utilized about 80% of their fuel export quotas, while apparent oil demand decreased to an estimated 12.5 million barrels, down 15% from the previous year.
The challenging market conditions have led to the recent bankruptcy of two independent refiners, Zhenghe Group Co and Shandong Huaxing Petrochemical Group Co. Local court statements indicate that these companies failed to reach an agreement with creditors regarding restructuring plans. Additionally, a third refinery, operated by Sinochem in Shandong province, is expected to begin creditor meetings later this month, according to a separate court statement.
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