China’s quest to keep more oil barrels at home to limit product exports in 2023.
Absent a strong domestic rebound in oil consumption, Beijing has provided oil refiners with massive import quotas and huge product export quotas to stimulate China’s industrial activity.
Despite some promising signs, Chinese oil imports are set for a 1.5 million b/d decline month-on-month, plunging back to lockdown-era seaborne arrivals of 9.5 million b/d, according to Kpler.
Amidst improving flights figures and higher mobility, domestic Chinese consumption might very well rebound soon, prompting Beijing to do another U-turn and limit product exports to avoid fuel inflation.
S&P Platts expects Chinese gasoline, diesel and jet demand to increase year-on-year by 7%, 4% and 38%, respectively, making it more unlikely that the current export-focused policy will be maintained in H2, OilPrice said.
China’s much anticipated oil demand revival will likely prompt the country to keep more barrels at home this year — a trend that could lead to a slump in clean oil product exports from Asia’s biggest oil consumer toward the later part of 2023, sources told S&P Global Commodity Insights.
Although Chinese refiners are holding plentiful export quotas now, analysts and industry sources said Beijing could do another U-run and put a lid on exports if domestic demand picks up. Any shortfall in cargoes from China at a time when the products market is bracing for an EU ban on Russian product exports may lift oil product cracks.
“China’s exports will become a wild card in 2023, on top of the upcoming price cap on Russia’s oil products, which are set to reshape global trade flows,” said Shu Zhang, an analyst with S&P Global.
/OilPrice, S&P Global/