Customs data showed that in May, China’s exports of oil products nosedived as export margins declined and overseas demand was hit by the coronavirus pandemic.
Last month, China shipped 185,000 bpd of gasoline, down by 65% month-on-month and 20% year-on-year to the lowest volume since March 2019. Demand was damped by the ample gasoline inventories in onshore tanks and floating storage in Asia-Pacific.
The steep margin declines also discouraged exports. During the month, Singapore's 92R gasoline price averaged USD30.8/barrel, way below the average spot gasoline price in southern China's Guangdong province of about USD38.19/barrel after-tax exemptions.
Export margins for Chinese producers contracted to around USD-6 to -8/barrel in the month. Early in May, even the margin touched a low of USD-16/barrel.
Other than that, China’s own recovering domestic economic activities after lockdown also led to a gradually rebounded demand for gasoline. Supply from the export market was drawn more to meet local demand.
Diesel exports also showed a sharp fall, by 45% month-on-month in May, but still up by 17% year-on-year. It was likely supported by the higher domestic gasoil yields and a slowdown in domestic demand.
In May, China’s gasoil output rose by 0.3% year-on-year to 3.18 million bpd but demand was hit by the end of the spring planting season and a seasonal moratorium on fishing in coastal waters curbed demand.
Suppliers were also reluctant to export as export margins from China to Singapore fell to -USD30/barrel or lowes.
The sharpest drop in oil product exports was posted by jet fuel, by 73% month-on-month and 62% year-on-year to 142,000 bpd last month as the pandemic has slashed flight numbers and significantly reduced demand for jet fuel.
Looking ahead, this month product exports are seen to rebound following the restart of economic activities in most countries previously under coronavirus-related lockdown in the previous months.
The flourishing crude oil prices could also lift the prices of China’s refined product in the domestic retail market, which would prompt refiners to find other markets for their products.
