China’s Fuel Exports Set a New Record in November
China’s total product exports touched a new high in November at 1.15 mmb/d, up by 18.3% y-o-y as refiners turned to overseas markets to soak up some of the excess supply. Diesel exports accounted for 348 kb/d while gasoline exports came in at 213 kb/d, both up by more than 60% y-o-y.
Record level crude runs contributed to the glut in refined products as refiners ramped up production after fall maintenance season. China’s overall crude throughput hit a record 11.14 mmb/d in November, up by 3.4% y-o-y.
Higher Singapore refining margins in November encouraged refiners to increase exports due to improved economics. Refiners also attempted to utilize their leftover export quotas which saw another increase in October. China’s total fuel export quotas for 2016 stands at 337 mmb, up by more than 50% y-o-y.
While there has been much talk about the Chinese government’s recent move to scrap fuel export quotas for teapot refineries next year, this is likely to have a negligible impact on overall levels of exports in the short run. Teapot refiners only account for less than 3% of total exports as they have limited infrastructure. The bulk of Chinese exports come from state-owned refiners who have been forced to turn to exports after losing market share at home to independent refiners.
Chinese product exports are expected to continue expanding in 2017 as the domestic surplus isn’t going anywhere, but at a more muted rate. The unexpected change in policy shows that government policy very much remains a wildcard in China as the independent refiners face increased scrutiny and tighter regulations.