Chinese fuel exporters have canceled some oil-product cargoes slated for export in October, as Asia’s top consumer prioritizes domestic supply during an extended period of upheaval in global energy markets.
Shipments including gasoline and diesel have been affected, according to people involved in shipping and purchasing the cargoes, who asked not to be identified as they aren’t authorized to speak publicly. The prompt spread for gasoline and diesel in Asia – the gap between immediately available cargoes and those for purchase next month – stretched higher late Wednesday as traders learned the news, indicating a tighter market.
Buyers were not provided with further details, including the exact reason for the cancellations, the people said. The shipments could yet be reinstated later in October after the holiday break ends next week, but any interruption to Chinese exports is closely monitored by buyers and traders at a time when the world is grappling with a supply crunch, thanks to disruptions in Russia and the Middle East.
State-owned companies such as Sinopec Group and Sinochem dominate fuel exports from the country, sending them largely to oil majors and trading houses, who in turn supply other Asian nations. While China is not Asia’s top fuel exporter, ranking below heavyweights like South Korea, its supplies are vital in times of strain.
Beijing has long emphasized the importance of maintaining healthy domestic supplies of key fuels including diesel, which it deems strategic. The government told top refiners back in March to suspend diesel and gasoline exports, a move to protect its own consumers in the early days of the Middle East war, but it eventually eased that policy.
China’s focus has only increased as the Northern Hemisphere heads into winter, with little sign of fuel exports returning to normal in the Persian Gulf or Russia, which has just extended a diesel export ban.
Supply of diesel – a vital industrial and heating fuel – has not been as tight in Asia as it has been in the Atlantic Basin. Still, any lasting pullback from China would tighten markets and send prices even higher, even if other refining giants in the region continue to send cargoes abroad.
Despite its vast refining industry, China is grappling with expensive crude supply and a sharp drop in Iranian flows, a blow to smaller private refiners. Domestic fuel inventories have plunged.