China issues new refined fuel, LSFO export quotas - sources

SINGAPORE, July 6 (Reuters) - China has issued a third round of petroleum-product export quotas, covering 5 million tonnes of refined fuel and2.5 million tonnes of low-sulphur fuel oil (LSFO), allowing refiners to cash out solid export margins and help ease tight global fuel supply.

The quotas, issued earlier than expected, will bring this year's total refined fuel export quotas to 22.5 million tonnes, 39% less than the first three allotments last year, and total LSFO to 12.25 million tonnes, up 11%.

Seven companies received new refined fuel export quotas, sources familiar with the matter said. They were China National Petroleum Corp (CNPC), China Petroleum & Chemical Corp (Sinopec), China National Offshore Oil Corp (CNOOC), Sinochem Holdings, China National Aviation Fuel, Zhejiang Petroleum & Chemical Co (ZPC) and China North Industries Group Corp (Norinco).

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CNPC, Sinopec, Sinochem and ZPC received LSFO quotas.

Chinese refiners have been lobbying Beijing to increase export quotas so they can benefit from record-high fuel prices in Asia and improve their balance sheets amid soaring crude oil prices.

Retail gasoline and diesel prices in China are capped by a pricing system that moves prices modestly once global oil breaches $80. Benchmark Brent crude has hovered above $110 since May. read more

Swelling product inventories and stunted fuel consumption in China due to COVID-19 lockdowns have also discouraged refiners from ramping up production.

"This time (the government) was super efficient. They gathered feedback last week and issued (the quota) this week," said one source.

However, traders said 5 million tonnes might not help refiners much in easing domestic inventory pressure, nor would it greatly alleviate supply tightness in the global market. Global demand is recovering with the fading of the pandemic, and supply is limited by sanctions on exports of Russia's refined products.

"It might be not much, but it's good enough for refiners to seize the chance to make some money at this red hot market," said a Chinese trader.

China exported only 10.35 million tonnes of gasoline, diesel and jet fuel in the first five months of 2022, 52% less than in the same period last year, according to customs data.

The table below lists the details of the new batch of 2022 fuel export quotas, with volume in million tonnes.

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Reporting by Muyu Xu, Florence Tan and Chen Aizhu; Editing by Peter Graff and Bradley Perrett

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