China's Surging Gasoline Exports Hurting Regional Refiners
Exports of gasoline from China are set to surge, predicts Fitch Solutions Macro Research.
According to a commentary that the unit of Fitch Group emailed to Rigzone, several factors are driving the pending increase in Chinese gasoline exports in the coming quarters. The research firm attributes the anticipated growth to:
- The Chinese government’s issuance of new oil product export quotas to the state-owned firms PetroChina Co. Ltd., China Petroleum & Chemical Corporation (Sinopec), China National Offshore Oil Corporation (CNOOC) and Sinochem Corp.
- New domestic refining capacity, with 890,000 barrels per day set to go online in 2019 alone
- An ongoing slowdown in domestic demand stemming from a slump in sales of gasoline-powered vehicles and stricter fuel efficiency measures.
“The prospect of increased gasoline exports out of China poses downside risk to regional gasoline margins and the profitability of refiners, which have fared poorly particularly towards the end of 2018,” Fitch Solutions Macro Research states in its commentary.
Singapore and South Korea, whose gasoline export destinations overlap with those targeted by Chinese refiners, will be among the hardest hit by the trend, the analysis notes. To illustrate, the report indicates that the gasoline crack spread – the difference between the price of a barrel (bbl) of crude oil and that of the finished product – in Singapore has shrunk dramatically within the past year.
“Gasoline cracks in Singapore slumped to an all-time low of USD1.3/bbl in December, from a peak of USD10.7/bbl in February, and are forecast to remain subdued for longer amid ample supply and persistent demand uncertainty brought on by broader global macro and financial concerns,” according to the commentary.
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