China diesel ex­ports may re­bound fur­ther on oil price rally

The Pak Banker - - MARKETS/SPORTS -

China's diesel ex­ports may be climb­ing fur­ther af­ter re­bound­ing from a five­month low as ris­ing global crude prices make ship­ments over­seas more prof­itable, ac­cord­ing to ICIS China.

Out­bound ship­ments may surge to more than 1 mil­lion met­ric tons this month, up more than 30 per­cent from av­er­age dur­ing Jan­uary and Fe­bru­ary, ac­cord­ing to Lin Ji­axin, an an­a­lyst with the Shang­hai-based com­mod­ity re­searcher. That would be the high­est since a record in Septem­ber. Ex­ports in Fe­bru­ary rose 8.6 per­cent from the pre­vi­ous month to 792,420 tons, the Gen­eral Ad­min­is­tra­tion of Cus­toms said Mon­day in an up­dated data re­lease. That's also al­most sev­en­fold the level from the same pe­riod last year.

China's ex­ports have fluc­tu­ated in re­cent months as re­fin­ers chased bet­ter mar­gins. The coun­try flooded re­gional mar­kets in the se­cond half of last year to re­lieve swollen stock­piles as in­dus­trial ac­tiv­ity slowed. The out­bound flow then slowed af­ter fuel price cuts were sus­pended as long as crude trades below $40 a bar­rel, keep­ing do­mes­tic prices higher than in­ter­na­tional rates. Brent oil, the in­ter­na­tional bench­mark, has surged more than 40 per­cent since tum­bling to a 12year low in Jan­uary.

"The gap be­tween over­seas and do­mes­tic prices has sig­nif­i­cantly nar­rowed with the re­bound in crude prices," Lin said by phone from Guangzhou. "Chi­nese re­fin­ers are ea­ger to lower their stock­piles amid weak lo­cal de­mand."

The na­tion's diesel in­ven­tory is ex­pected to have risen by as much as 15 mil­lion bar­rels last month, Nevyn Nah, a Sin­ga­pore-based an­a­lyst with En­ergy Aspects Ltd., said by e-mail. "High ex­ports are ex­pected amid weak do­mes­tic de­mand," Nah said.

Sinochem Group's Quanzhou re­fin­ery in south­ern China, the com­pany's largest by ca­pac­ity, plans to ex­port about 100,000 tons of diesel this month, its first ship­ments ever of the fuel, a com­pany of­fi­cial said last week, de­clin­ing to be named be­cause of in­ter­nal pol­icy.

The profit from mak­ing diesel -- the so-called crack spread -- in Sin­ga­pore this month has re­bounded as much as 43 per­cent since hit­ting the low­est in at least five years in Jan­uary, ac­cord­ing to Bloomberg Fair Value.

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