China will ramp up gasoline exports, in July and August, to near record levels, with cargoes moving to Nigeria, as refiners seek outlets for their fuel, amid a wave of new production and slowing domestic demand.
The surge in Chinese shipments, will fill a supply gap caused by refinery outages in the United States and the Middle East, but are likely to accelerate a plunge in Asian gasoline margins, which have dropped 50% since July 12, when they clawed back to a three-month high.
China’s refineries, led by PetroChina Co, the country’s second-largest, will export about 1.5 million tonnes of gasoline a month, in July and August, said two senior traders with knowledge of China’s gasoline exports. That is up from June’s exports of 1 million tonnes, and near the record of 1.69 million tonnes, exported in March, according to Chinese customs data.
The export surge is a result of the start-up of two large-scale refineries owned by Hengli Petrochemical and Zhejiang Petrochemical, that will each add about 4 million tonnes per year of new gasoline output, when fully operational.
The surge will reverse the trend of falling gasoline exports in 2019, for the first half of 2019 they are down 9% from the same period, a year ago.
“Gasoline was overflowing in China as Hengli shocked the market, companies took the advantage of stronger demand in Latin America and West Africa,” said one of the traders.
PetroChina was granted gasoline export quotas of 4.7 million tonnes in the second batch of quotas issued in May, more than half of the quotas given. As a result, the company is placing cargoes to Mexico, Chile and Nigeria, according to the traders.
“Gasoline surplus in China is exacerbated by slowing demand growth, given weakening consumer confidence as the trade war continues, reflected also in slumping car sales,” said Michal Meidan, director of the China energy programme, at Oxford Institute of Energy Studies.
Chinese refiners have loaded 1.2 million tonnes of gasoline for export as of July 23, after a record 1.6 million tonnes in June, according to data from Refinitiv.