Chinese oil refineries, according to Reuters, suspended exports of petroleum products in October. This could limit diesel fuel supplies in some Asian countries and affect other regional markets, Channel NewsAsia reports. Beijing has not officially announced a halt to exports.
According to Reuters, at the beginning of October, major Chinese refineries did not receive permits to ship petroleum products beyond Hong Kong and Macau. China regulates monthly supplies of diesel, gasoline and aviation fuel. In July, Beijing eased export restrictions introduced in March after the start of the war with Iran.
Analysts link the pause to efforts to ensure sufficient domestic market inventories amid uncertainty over oil supplies from the Middle East. Sparta Commodities senior analyst June Goh said the decision signals China’s concerns about the security of oil flows through the Strait of Hormuz.
According to Reuters, China linked fuel exports to replenishing domestic inventories to their pre-war level. At the end of September, the country’s commercial gasoil and diesel inventories were about 20 million barrels below that level, according to Kpler estimates, while gasoline inventories were about 9 million barrels lower. China does not disclose fuel inventory data.
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According to Kpler, excluding Hong Kong, Singapore was the largest importer of diesel from China this year, followed by Australia, Malaysia, Bangladesh and the Philippines. Vietnam and South Korea are also among the ten largest destinations. At the same time, import volumes to Singapore do not necessarily reflect domestic consumption, as the country is a major regional trading hub and itself produces diesel for the domestic market and exports.
Michal Meidan, head of China energy research at the Oxford Institute for Energy Studies, noted that export restrictions deprive the market of Chinese supplies that could restrain prices in the near term. He named lower-income countries as the most vulnerable, as it will be more difficult for them to pay for alternative fuel cargoes.
In June Goh’s view, South Korea and India, which are increasing refining, could partially offset the shortage in the short term. However, redirecting Indian diesel to Asia could further exacerbate fuel shortages in Europe. It is unknown whether China will restore export permits after the Golden Week ends on October 7: this will depend on domestic inventories and refining volumes.
