China seen cutting May diesel exports to 4-mth low

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

30 Apr 2009

China will cut diesel exports in May by 40 percent versus April volumes to a four-month low of 180,000 tonnes, to meet rising domestic demand and stockpiling at a time of refinery maintenance, traders said on Wednesday. Its exports of gasoline next month will remain at 180,000 tonnes, as consumption holds steady, they said.
State refiners Sinopec Corp and PetroChina are projected to slash diesel exports from this month’s 300,000 tonnes, due to the peak farming season when tractors crank up fuel usage and as wholesalers and retailers stockpile on hopes of another round of price increase.
If the estimates hold in line with official customs data, which will be released weeks later, a fall in Chinese diesel exports, along with some recovery in Indonesian imports, would help support prices in Singapore.
The benchmark gas oil timespread in Asia’s trading hub improved to 15 cents a barrel in contango on Wednesday from minus 50-60 cents last week.
“The lingering expectations of a price hike are driving up stockpiling. There is also some form of demand recovery fundamentally,” said one trader who is familiar with the flows.
Signalling a strengthening market, wholesale diesel prices in China rose to 5,350 yuan ($783) a tonne from 5,000 yuan ($732) earlier this month.
Wholesale gasoline prices for 90-octane gained around 200 yuan ($29) a tonne to 6,200 yuan ($908).
“Gasoline consumption is stable in China,” another trader said.
China’s car sales in March climbed to a monthly record, rising 10.3 percent from a year ago.
“It seems like the Chinese economy has bottomed out. There are signs of fuel demand starting to pick up though a month of data doesn’t really create a trend,” said Victor Shum, a consultant with Purvin & Gertz in Singapore.
But it will take time for Beijing’s massive $585 billion stimulus to boost the economy. For the first quarter, Sinopec’s fuel sales fell 12.4 percent from a year ago, reflecting weak demand for that period.
China’s deputy central bank chief had said the world’s third-largest economy was recovering after hitting a bottom in the fourth quarter and was on track to expand at close to its 8 percent goal this year. But its commerce minister said China’s export-driven economy needs worldwide improvement, especially in the United States, to return to growth.
Price hike?
Maintenance shutdowns will also curb China’s production, prompting the refiners to rein in diesel exports.
Sinopec’s Guangzhou refinery is scheduled to have taken a 160,000 barrels per day (bpd) crude unit offline for 45 days from April 26/27, while a 180,000-bpd crude unit at the Zhenhai refinery will be shut for a month in May.
Refined fuel inventories held by China’s oil duopoly at the end of March fell 14.7 percent versus end-February, and sales rose 21 percent in the same period, signalling a rise in oil demand.
The Chinese fuel market is hoping for another round of pump price hike, though global crude has fallen since the previous one last month, and this has driven retailers to stock up diesel and further draining supply held by state refiners.
“I think people are all waiting for one. The gas stations are all stockpiling,” said a Chinese trader.
The world’s second-biggest energy user raised gasoline prices by 4.6 percent and diesel by 3.2 percent on March 25, raising expectation that the government is sticking to its promise of the new market-based pricing system.
Beijing has never explicitly stated how it prices fuel, but industry sources had said the new system might be tracking a basket of crude comprising Dubai, Brent and Indonesia’s Cinta grade.
London Brent crude futures rose 56 cents to $50.56 a barrel by 1115 GMT, though prices were down 2.2 percent from late-March levels.
“Technically it’s possible,” said one trader.
“For 15th in every month, there is a chance to adjust oil prices according to the average prices in the past 22 days. On April 15, we saw higher average prices,” he added.

Source: Reuters