Oil report

China slashes first round of oil products export quotas - sources

* Sinopec gets about half of first batch total
    * 'Teapot' refiners absent from quota list
    * Traders still see 2017 quotas matching or above 2016

    By Chen Aizhu and Meng Meng
    BEIJING, Dec 29 (Reuters) - China has cut oil product export quotas to the
nation's four oil majors by 40 percent in the first round of licences for 2017,
according to two sources who have seen the documents, even as traders expect
allowances for overseas sales to meet or exceed this year's record levels.
    The notice did not include quotas for independent refiners, known as
"teapots", in line with a report by Reuters earlier this month that the
government has ditched the small refiners from its export program. 
    In a notice dated Dec. 23, the Ministry of Commerce and the General
Administration of Customs said the four state majors will be allowed to sell
12.4 million tonnes of gasoline, gasoil and jet fuel abroad next year. That's
down from 20.54 million tonnes in the same round this year. 
    Still, the cut is likely to bring little relief to the stubbornly saturated
Asian oil market as China's majors did not use up the huge quotas issued at the
start of last year, and have simply applied for more realistic quotas this year,
traders said.
    "The shrinking quota doesn't reflect shrinking demand from overseas.
Instead, it reflects a shift in company exporting strategy," said a China-based
trader who declined to be named, adding that companies were better matching
exports to quotas.
    "We expect the total quota for 2017 to be on par or a bit higher than 2016,"
the trader added.
    China issued allowances for a record 46.08 million tonnes of oil products in
2016, up 80 percent from 2015. In the first 11 months of the year, it exported
43 million tonnes of oil products - including products other than gasoline,
gasoil and jet fuel - up 35 percent on a year earlier. 
    Traders said the next round of quotas is expected to be issued during the
second quarter and will likely be higher than the first as regional fuel demand
for construction and transport picks up after the winter slowdown. China usually
releases three or four rounds of quotas a year.
    The Ministry of Commerce has yet to comment.
    Independent refiners, known as "teapots", were not included in the list, a
change from the first round this year when four independent refiners were
granted quotas for the first time.
    Teapots account for only a fraction of China's fuel exports, but dropping
them will hand the export business back to the majors and deal a blow to the
small but fast growing group that has brought new competition to China's oil
    With 6.05 million tonnes, Sinopec Corp won about half of the
total in the first round. Sinochem Group did not receive any quota
for jet fuel.
    Out of the three products, gasoil accounted for 5.25 million tonnes, 42
percent of the total allotted to the four majors; gasoline for 3.65 million
tonnes, 30 percent of the total, and jet fuel with 3.5 million tonnes made up
the remaining 28 percent.

    Export allotments, measured in tonnes.       
              GASOLINE               GASOIL                JET FUEL            
                   First      First      First      First       First     First
                batch in   batch in   batch in   batch in    batch in  batch in
                    2017       2016       2017       2016        2017      2016
 PETROCHINA     1.60 mln   2.58 mln   1.64 mln   2.21 mln     760,000  3.15 mln
 SINOPEC         800,000    900,000   2.71 mln   5.45 mln    2.54 mln  3.65 mln
 CNOOC           250,000    300,000    350,000    920,000     200,000   380,000
 SINOCHEM        1.0 mln    600,000    550,000    150,000           0   150,000
 TOTAL          3.65 mln   4.38 mln   5.25 mln   8.73 mln     3.5 mln  7.33 mln
 (Additional reporting by Elias Glenn and Ryan Woo; Writing by Josephine Mason;
Editing by Richard Pullin)