Tuesday, May 17

China urges state refiners to halt April fuel exports, sources say

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SINGAPORE — Beijing has told Chinese state refiners to consider suspending exports of gasoline and diesel in April as the Ukraine war heightens concern of shortages, three sources with knowledge of the matter said on Wednesday.

The global market is reeling from the impact of Russia’s invasion of Ukraine that has led to western sanctions on Russia, the world’s leading supplier of crude and products.

The prospect of a further reduction in Asian exports helped to drive refining margins for some products to record highs.

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Asian supplies have also been reduced by outages because of the refinery maintenance season and action by the Chinese government earlier in the year to prevent excessive production.

The three sources, who spoke on condition of anonymity because of the sensitivity of the issue, said companies were likely to scale back overseas shipments further in April following reduced exports in March.

The National Development and Reform Commission did not immediately respond to a request for comment.

One of the sources said the cuts were aimed at preventing a shortage as independent refiners were under pressure to process less because of the surge in crude prices.

Another said, exports might not be halted completely.

“My feeling is companies were told to hold off talks for new export deals,” the source said.

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Russia is the world’s top exporter of crude and oil products combined, at around 7 million barrels per day, or 7% of global supply, according to the International Energy Agency.

Concern about disruption of supplies has driven global oil prices to 14-year highs, potentially squeezing profits for oil refiners, but demand for products is such that refining margins for several oil products in Asia hit all-time highs on Wednesday.

The Asian gasoil crack, or the profit of processing benchmark crude oil Dubai into diesel fuel, hit a record of $44 a barrel and that for aviation fuel also touched a new high at $36 a barrel.

VLSFO margins jumped to an all-time high of $31.79 a barrel, while gasoline margins climbed to $16.71 a barrel, the strongest level since October 2021, and up 46 cents from the last close.

China reduced refined fuel exports by a third in the first two months of the year after Beijing in January cut export quotas to discourage plants from over-processing.

China in January released 13 million tonnes of refined fuel quotas – consisting mostly of diesel, gasoline and aviation fuel – under the first batch for 2022, down 56% from the first allotment of 2021.

(Reporting by Chen Aizhu, Muyu Xu and Florence Tan; Additional reporting by Koustav Samanta and Mohi Narayan; Editing by Louise Heavens and Barbara Lewis)