China to Raise Refined Oil Export to Cut Inventory Pressure
Source said that Sinopec and PetroChina would raise their diesel export volume in August by 260kt and 200kt respectively, and they would raise their diesel export volume in September as well. SCI learns that currently, the gasoline export profits are moderate, while the diesel export profits remain negative. Nonetheless, Sinopec and PetroChina plan to raise their future diesel export volume, reflecting the sluggish domestic diesel market.
According to the statistics released by the General Administration of Customs, in June 2020, China’s gasoline export volume was 760kt, up 11.76% M-O-M and down 23.9% Y-O-Y, and from January to June 2020, China’s total gasoline export volume was 7,880kt, up 16.3% Y-O-Y. In June 2020, China’s diesel export volume was 1,040kt, down 28.28% M-O-M and down 49.9% Y-O-Y, and from January to June 2020, China’s total diesel export volume was 11,350kt, down 5.3% Y-O-Y. Considering the high gasoline and diesel inventory in China, SCI reckons that the gasoline and diesel export volume in July would rise further.
In terms of refined oil prices, from the beginning of 2020, influenced by bearish factors at home and abroad, China’s refined oil market prices kept trending down. Though the prices of gasoline revived slightly from late June to early July, the prices of diesel continued dropping. As a consequence, most traders adopted a cautious attitude toward the diesel market. According to SCI’s statistics, up to August 20, the average wholesale price of 92Ron gasoline at state-owned refineries was RMB 5,897/mt, while the average wholesale price of 0# diesel at state-owned refineries was RMB 5,419/mt. The average price of 92Ron gasoline at Shandong independent refineries was RMB 5,341/mt, while the average price of 0# diesel at Shandong independent refineries was RMB 4,727/mt. SCI reckons that the severe inventory pressure and overcapacity are the two major factors hampering the revival in gasoline and diesel prices.
According to SCI’s statistics, in July 2020, China’s total gasoline and diesel inventory reached 59.7044 million mt, and the gasoline and diesel storage capacity utilization hit 74.63%. Therein, the gasoline inventory was 26.5469 million mt, up 6.33% M-O-M, and the diesel inventory was 33.1575 million mt, up 9.76% M-O-M. Normally, the storage capacity utilization has a limitation at 80%-85%, and therefore, China’s gasoline and diesel inventory is close to its limitation.
From February 2020, China’s gasoline and diesel storage capacity utilization remained at a high level. Though the government issued multiple policies to promote economic development and expand the demand for refined oil, influenced by the increasing supply, demand slack season, sluggish exports, etc., China’s gasoline and diesel market still suffered from oversupply. Next, SCI will analyze the refined oil market fundamentals.
