* Beijing issues Q3 quotas but volumes mostly jet fuel -source
* Possibility of no diesel exports for 3rd quarter -source
* Lack of exports likely to support Asian diesel margins
By Jessica Jaganathan
SINGAPORE, July 5 Asia's biggest refiner Sinopec Corp will export no diesel for a third month in July, and may also skip shipments in August, industry sources with knowledge of the matter said on Friday.
China controls diesel exports through quotas to a few state-run traders after sizing up domestic needs. Beijing has just approved third-quarter export quotas for Sinopec, but most of the volumes are for jet fuel, said one of the sources.
The continued absence of China's dominant diesel exporter from the market will likely support margins for the fuel near three-month highs hit late in June, offsetting an expected slump in demand from Saudi Arabia and Indonesia.
Sinopec's total jet fuel export quotas are about 1 million tonnes for the quarter, the source said.
"But there will likely be no gasoil exports for the third quarter," the source added.
Lack of diesel exports from China boosted Asian gasoil margins late last month when Saudi Arabian and Indonesian demand rose ahead of the Muslim fasting month of Ramadan.
A second source with knowledge of the matter said it was too early to say for sure on August diesel exports but Sinopec had none planned so far. Export plans will be clearer by the end of July, the second source said.
State refiners can apply for an increase in quotas if needed or if they use up an existing allotment.
The restrictions on diesel exports have not yet meant a build up in stocks, a source close to a Chinese refiner said, as authorities are trying to boost demand.
"Actually, I heard the diesel inventory is not as high as before," the source said.
The country's second-largest refiner PetroChina will also most likely not be exporting much diesel in July, though its export commitments for August are not yet clear, another industry source said.
China, the world's second-largest oil consumer, turned net diesel exporter in mid-2012 as the weakest pace of economic growth in 13 years pared annual demand growth for the fuel to less than two percent.
For the first four months of this year, overseas diesel shipments from China spiked to 250,000 tonnes to 400,000 tonnes a month, following weak domestic demand for the fuel that struck as new refining capacity came online.
That combination contributed to a collapse in Asian gasoil margins to the lowest in more than two years in late April.
Official customs data shows that China exported 227,133 tonnes of diesel in May, but this was likely sent to the Hong Kong bunker market, an industry source said.
May's exports were up about 27 percent from the same period last year, but down from this year's monthly high of 415,931 tonnes in March, the data showed.
The figures do not fully reflect China's diesel imports or exports, since they include transit barrels shipped to tax-bonded storage, which may not be destined for China. (Editing by Tom Hogue)