China Diesel Exports Seen Rebounding Further on Oil Price Rally

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

Outbound diesel 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 percent from the previous month to 790,000 tons, the General Administration of Customs said Monday. 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 12-year 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.”

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.

To contact Bloomberg News staff for this story: Jing Yang in Shanghai at jyang251@bloomberg.net. To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Abhay Singh

By: Bloomberg News

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