China halts October fuel exports to shore up domestic stocks

China has suspended exports of refined oil products for October as Beijing moves to rebuild domestic fuel inventories, adding further pressure to global markets already facing supply disruptions from the conflict involving Iran and attacks on Russian refining infrastructure.

Four sources briefed on the matter told Reuters that major Chinese refiners had not been given approval to export diesel, petrol or jet fuel this month to markets outside Hong Kong and Macau. It remains unclear whether Beijing will allow shipments to resume after China’s week-long holiday ends on October 7, with the decision expected to depend on domestic inventories and refinery output.

China began restricting fuel exports in March after the conflict involving Iran disrupted Middle Eastern crude supplies. The restrictions were eased in July, after which Beijing shifted to managing diesel, petrol and jet fuel exports on a monthly basis.

Domestic energy security takes priority

Michal Meidan, Head of China Energy Research at the Oxford Institute for Energy Studies, said the latest move showed that securing domestic supplies remained a key priority for Beijing.

She said Chinese refiners would like to take advantage of strong export margins and have the capacity to increase refinery runs, but exports are likely to remain restricted until domestic stocks reach adequate levels.

The export suspension follows Chinese President Xi Jinping’s recent visit to Washington, where US President Donald Trump urged him to help stabilise global fuel supplies.

US Energy Secretary Chris Wright has said global markets have lost diesel exports from both the Middle East and China, while Washington expects Europe to announce measures aimed at adding more diesel supplies.

The Trump administration has also pressed Germany and France to draw down emergency diesel inventories to help ease prices, warning that the US could otherwise consider restricting its own diesel exports, according to Reuters.

Chinese fuel stocks remain below pre-war levels

Analysis by Zameer Yusof, Senior Manager for Clean Oil Products at Kpler, showed that China’s commercial gasoil and diesel inventories remained about 20 million barrels below pre-war levels, while petrol stocks were around 9 million barrels below that threshold.

Yusof said the figures meant a pause in October exports had been broadly expected by the market.

China’s decision adds pressure to fuel markets already constrained by supply losses linked to the conflict involving Iran and attacks on Russian refinery infrastructure.

Asian diesel price spreads for October and November rose to a two-week high as traders priced in the expected absence of Chinese export supplies.

China shipped millions of tonnes of fuel in September

In September, China exported about 1.4 million tonnes of diesel, 500,000 tonnes of petrol and at least 2 million tonnes of jet fuel, including bonded shipments to Hong Kong and Macau.

Singapore, Malaysia, Australia, Vietnam, Bangladesh and the Philippines were among the leading destinations for Chinese fuel exports during the month.

Yusof said South Korean refiners could replace part of the missing supply, although volumes available on the spot market would be limited because refiners must reserve fuel for deliveries under longer-term contracts.

Asian fuel markets could therefore remain tight if Beijing does not resume exports after the holiday period, adding another source of pressure to a global refined-products market already facing constrained supplies.

Source: Reuters