China will increase gasoline exports in July and August to near record levels with cargoes moving to Mexico and Nigeria as refiners seek outlets for their fuel amid a wave of new production and slowing domestic demand.
The surge in Chinese shipments will fill a supply gap caused by refinery outages in the United States and the Middle East but are likely to accelerate a plunge in Asian gasoline margins, which have dropped 50% since July 12, when they clawed back to a three-month high.
China’s refineries, led by PetroChina Co, the country’s second-largest, will export about 1.5 million tonnes of fuel a month in July and August, said two senior traders with knowledge of China’s fuel exports. That is up from June exports of 1 million tonnes and near the record of 1.69 million tonnes exported in March, according to Chinese customs data.
The export surge is a result of the start up of two large-scale refineries owned by Hengli Petrochemical and Zhejiang Petrochemical that will each add about 4 million tonnes per year of new gasoline output when fully operational.
The surge will reverse the trend of falling gasoline exports in 2019, for the first half of 2019 they are down 9% from the same period a year ago.
“Gasoline was overflowing (in China) as Hengli shocked the market…companies took the advantage of stronger demand in Latin America and West Africa,” said one of the traders.