China's Sinopec, PetroChina to skip gasoil exports

China's top two refiners -- China Petroleum and Chemical Corp, or Sinopec, and PetroChina -- plan to skip gasoil exports in August and likely in September as well, market sources said Friday.

"[Sinopec has] no gasoil exports [scheduled for] Q3, only jet," a Chinese trader said. Sinopec is said to have exhausted its gasoil export quota.

The country's top refiner Sinopec's jet fuel export quota for the third quarter is around 900,000 mt. China's jet fuel exports in the first quarter totaled 2.19 million mt, according to customs data. Exports in April and May totaled 1.49 million mt.

PetroChina, which is the second largest refiner and accounts for just a fraction of China's total gasoil exports, is also said to have no gasoil for export in August and is unlikely to have any in September either. The company has not exported any gasoil since April.

China exported 1.62 million mt of gasoil between January and May. PetroChina exported about 80,000 mt/month of gasoil or 240,000 mt in the first quarter, with Sinopec accounting for most of the rest, sources said.

The lack of gasoil supply from China is likely to keep the Asian gasoil market bullish, as supply is expected to be tight amid strong demand from the Middle East and Africa.

Saudi Aramco will continue to import gasoil in August for summer demand as well as to supply to Egypt as part of its $5 billion assistance package, traders said. Kuwait has recently delivered up to 100,000 mt of gasoil into the Suez, they added.

An outage at Bahrain Petroleum Company's Sitra refinery is adding to the bullish sentiment in the market, sources said.

The August/September gasoil backwardation has almost doubled in the past week, jumping to 77 cents/b Thursday from 40 cents/b on July 11. A steeper backwardation signals a market where demand is strong and supply tight.

The Singapore physical benchmark 500 ppm sulfur gasoil crack against front-month cash Dubai crude has been holding well at the $19-21/barrel level since mid-June.

Oil export quota volumes are decided by China's Ministry of Commerce and National Development and Reform Commission, based on domestic demand and supply, and import and export trends. They are believed to be issued quarterly and companies that have exhausted their quotas have to apply for new ones in order to continue exporting surplus barrels.

China's gasoil exports since late 2012 have risen significantly until May because of slowing domestic demand. Domestic production in the first half of the year was up a marginal 0.1% from the same period last year to 85.63 million mt. The bulk of China's gasoil exports comprise 0.25% sulfur material.