Traders say China will restart October fuel exports below September's forecast

Four traders said on Friday that China is set to resume exports of diesel, gasoline and jet fuel in October, after a brief halt for Golden Week, China's national holiday.

Two other industry participants put the approved amount at about 3.7 million metric tons for the three fuels together.

China's National Development and Reform Commission and the Ministry of Commerce did not immediately respond to requests for comment from Reuters.

That approval is smaller than the slightly more than 4 million metric tons refiners had been expected, as of Wednesday, September 2, to export in September.

September loadings are a different count. Trade estimates reported on Thursday, October 1, put them lower than August: 1.4 million metric tons of diesel, 500,000 of gasoline and at least 2 million of jet fuel. The jet figure includes bonded volumes to Hong Kong and Macau, which the October halt did not cover.

The traders said a restart would help ease tight markets for those fuels.

"The crude market has largely normalized even as refined product supplies remain constrained," Natasha Kaneva, head of global commodities strategy at JPMorgan, said on Wednesday, September 30.

Asian gasoline margins over Brent crude hit a record of more than $50 a barrel on Thursday, October 1, and Singapore diesel rose 5% over that day and the day before. The gap between Asian diesel for October and for November reached a two-week peak, on expectations that Chinese export supply would be absent.

Group of Seven leaders agreed on Friday, October 2, to release 100 million barrels over four months to ease that same diesel shortage. The barrels are the unfinished remainder of a 400-million-barrel commitment the International Energy Agency coordinated in March, and on Wednesday, October 7, the agency agreed to speed the release and give diesel priority.

Beijing checks the stocks each month

Beijing still checks these shipments month by month, on top of the quotas that cap how much fuel can leave. Four people familiar with the refiners' plans said on Thursday, October 1, that permission after the holiday could depend on domestic inventories and refining output.

Zameer Yusof, a senior manager for clean oil products at Kpler, an analytics firm, said commercial gasoil and diesel stocks were around 20 million barrels below the threshold, and gasoline about 9 million barrels short. That shortfall, he said, made a pause likely.

"The government's focus remains domestic supply security," Michal Meidan, head of China energy research at the Oxford Institute for Energy Studies, said on Thursday, October 1. "International markets are an afterthought."

A smaller October approval does not change that. Exports will be limited, she said, unless stocks at home are adequate.

The halt was not a public order. Those same four people said October exports had been stopped so Beijing could keep stocks at home. Major refiners began the holiday, which ran through Wednesday, October 7, with permission to ship only to Hong Kong and Macau.

China began curbing these exports in March, after the US-Israeli war on Iran disrupted crude flows and refinery output, and relaxed the curbs from July through September.

Singapore, Malaysia, Australia, Vietnam, Bangladesh and the Philippines were among the top destinations for Chinese fuel in September.

Bangladesh takes up to a third of its refined-fuel imports from China's Unipec and PetroChina.

Yusof said South Korean refiners could cover part of the missing supply, though spot sales would be limited by contracts already signed.

Exports are set to resume in October, but only in the volume Beijing has approved. The next approval still turns on stocks at home.