China has granted an export quota of more than 14mn tonnes of fuel to refiners, down from nearly 21mn tonnes in the first batch of the year but including naphtha despite a domestic shortage, a trade source familiar with the matter said.
Gasoil makes up the bulk, or 39%, of the total volumes approved in the second round at 5.71mn tonnes, followed by gasoline at 5.58mn tonnes.
All six independent Chinese refiners were given approval to export mostly gasoline as it is one of the better-performing oil products since last year in terms of margins.
“Gasoline export margins are better, thanks to healthy car sales in the region,” said a trader with knowledge of the quotas arrangement, adding that the diesel market is not doing well.
Although gasoline cracks are doing better than most other oil products, Asia is struggling with high stockpiles and fuel is being held on tankers, a rare situation.
China had bombarded Asia with nearly 880,000 tonnes of gasoline in December 2015, the highest level in six years and more than 90% higher than the monthly average for January to November at 456,000 tonnes.
Beijing typically grants quotas four times each year. The 21mn tonne quota granted in January 2016 was higher than any of the four rounds in 2015 as China was grappling with excess supply due to the slowdown in the Chinese economy.
Four independent refiners, known as teapots, have also been granted export quotas this year for the first time. Although gasoline exports from China fell in February to about 601,000 tonnes, they were still considered high especially when Europe has also been exporting gasoline to Singapore.
CNOOC was not involved in the second batch of export quotas as the first quotas of 1.6mn tonnes of fuel, comprising gasoline, gasoil and jet fuel/kerosene, was sufficient, the trade source said.
The government also granted rare naphtha quotas to two plants operated by Sinochem Corp, totalling 90,000 tonnes, a move which traders said was due to current attractive naphtha crack margins rather than the start of a long-term trend, as the country is net short of the product.   China is shipping out record amounts of refined fuel as small, independent refineries have emerged since late last year to join state oil majors as purchasers and refiners of crude.