September 21, 2018 / 9:29 AM / 2 years ago

China may issue more fuel export quotas to refiners to prevent run cuts -sources

BEIJING, Sept 21 (Reuters) - China may issue an additional 3 million to 4 million tonnes of permits for refined fuel exports for 2018 to prevent state-owned refiners from having to slash throughput rates, according to three sources briefed on the matter.

The government has been looking to keep fuel export quotas at around 43 million tonnes this year, steady with 2017 levels, to maintain overall trade balances.

But the state refiners have been using the quotas already granted for this year faster than expected, rushing to ship more gasoline, diesel and jet kerosene overseas in the first nine months compared to the same period of 2017 because domestic refinery production has expanded faster than demand.

While exports may not be as lucrative as sales in the domestic market, where margins are largely guaranteed, the overseas shipments helped bolster margins at home by thinning local fuel supplies.

Refiners - including Sinopec Corp, PetroChina , CNOOC and Sinochem - will have already used about 35 million tonnes, or 81 percent of the total grants so far by end-September, according to a state oil executive with direct knowledge of the situation.

"The big oil firms are trying this week to persuade the government to release more quotas, or they may be forced to cut runs in the fourth quarter as the remainder is far from enough," said the executive.

Most refiners would try to avoid reducing runs in the fourth quarter, when diesel fuel demand typically picks up with an increase in construction activities and the lifting of a summer fishing ban, and the Golden Week holiday of early October, which lifts gasoline and jet fuel consumption.

The three sources at state oil firms estimated the government could issue an additional 3 million to 4 million tonnes of fuel export quotas as early as next week.

The sources declined to be named as the discussions are not public. Representatives of CNPC, Sinopec, CNOOC and Sinochem did not respond to requests for comment.

The National Development & Reform Commission (NDRC) and Ministry of Commerce also did not respond to queries.

Chinese customs data showed huge gains in transportation fuel exports this year. Gasoline exports in the first seven months grew 44 percent over the same period last year to 8.33 million tonnes, diesel rose 25 percent to 11.68 million tonnes, and jet kerosene gained 15 percent to 8.08 million tonnes.

State-run refiners earned bumper profits this year as diesel demand firmed while many small fuel blenders were forced out of business and some independent oil processors slashed output over the summer months because of stricter government tax scrutiny enacted from March. (Reporting by Chen Aizhu; Editing by Tom Hogue)

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