China’s fuel exports will rise only slightly in June from May as government restrictions on shipments largely remain in place to preserve supply for the domestic market amid the biggest oil disruption in history.
China is expected to export about 550,000 metric tons of fuels next month, up from around 500,000 tons set to be shipped this month, trade sources with knowledge of the plans told Reuters on Friday.
Days after the conflict in the Middle East erupted and led to the closure of the Strait of Hormuz, the Chinese government moved to ban all fuel exports amid a worsening supply crunch, with the exception of some volumes shipping out to certain countries in Southeast Asia.
At the time, China told energy companies to suspend new fuel export contracts and try to cancel already arranged fuel shipments abroad as global fuel markets tightened amid the Middle Eastern war that effectively froze most traffic through one of the world’s biggest oil and fuel chokepoints.
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Last month, China eased the export restrictions as domestic fuel stockpiles soared.
But the state energy companies are now allowed to export much lower volumes than they did before the war.
Under the current restrictions, China’s state oil giants now have to obtain government approval on a monthly basis for every cargo they export, according to Reuters’ sources.
China issues fuel export quotas for both state and independent refiners on a regular basis. State-owned energy companies get the bulk of these quotas.
Despite the easing of the Chinese restrictions on fuel exports, shipments so far in May have been nearly half the volumes from before the Iran war, the Financial Times reported last week, citing data from Kpler.
Significantly lower Chinese gasoline, diesel, and jet fuel exports may not be enough to alleviate the fuel crisis in the rest of Asia, which is reeling from the worst oil supply shock ever.
By Tsvetana Paraskova for Oilprice.com
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