* Sinopec gets Q4 diesel export quota of more than 1 mln T
* Exports likely to cause slump in diesel processing margins
* Reduced demand, higher India exports add to Asia supply
(Adds impact on processing margins and supply, trader comments,
details on PetroChina export quota)
By Jessica Jaganathan
SINGAPORE, Sept 16 China's top refiner Sinopec
Corp is expected to resume high-volume
diesel exports after Beijing approved a quota for the company to
export more than 1 million tonnes in the fourth quarter,
industry sources said on Monday.
Sinopec could export more than it did in the first quarter
of the year, when China's stepped up diesel exports caused
processing margins for the oil product to dive to their lowest
in more than two years.
The exports could give rise to another diesel supply glut in
Asia that would pressure margins again. Demand for the
industrial and transport fuel has already dropped due to an
economic slowdown in Asia exacerbated by a recent rout in
emerging market currencies, traders added.
China, which became a net diesel exporter in mid-2012,
controls shipments of diesel by issuing quarterly export quotas
to a few state-run traders to ensure adequate domestic supply.
Beijing has approved fourth-quarter export quotas for
Sinopec and the country's second largest refiner PetroChina
, sources close to the matter said.
Sinopec's approved volumes are more than 1 million tonnes
for the quarter, one of the sources said, declining to give
Traders said the approved volumes are about 1.2 million
tonnes for the fourth quarter, or about 400,000 tonnes each
month. This could not be confirmed with Sinopec.
PetroChina has also received a quota to export diesel, with
its volumes slightly lower than Sinopec's, a second source said.
PetroChina's volumes also could not be confirmed.
China exported about 1.05 million tonnes of diesel in the
first quarter, according to official customs figures. Volumes
dropped to about 690,000 tonnes in the second quarter after
refiners used up government-issued quotas controlling sales for
the first half of the year.
Third-quarter volumes are expected to show a sharp decline
from the first two quarters. Sinopec exported only about 50,000
tonnes of diesel in August and none in July, traders said.
Domestic demand usually drops in the fourth quarter as
agricultural demand for gasoil falls during China's winter. That
is probably what prompted the government to approve higher
volumes for the two state companies, the traders said.
HIT ON DIESEL MARGINS
The increased diesel quota could hit diesel margins, and in
turn refinery profits, as the industrial fuel makes up 30 to 40
percent of production, traders said.
The Asian gasoil margins dipped to a nearly
three-month low of about $16 a barrel above Dubai crude in late
August, Reuters data showed.
Key diesel importers such as Indonesia and Vietnam have
curbed imports of the fuel for most of the year due to reduced
domestic demand and high inventory.
India also stepped up diesel exports from August due to
reduced domestic demand and a weaker currency, while a new
refinery in Jubail, Saudi Arabia, is expected to add to Asia's
"We are quite bearish about the refinery margins in the
fourth quarter because of the potential increase in Chinese
diesel exports," a source with a North Asian refiner said.
(Reporting by Jessica Jaganathan; Editing by Tom Hogue)