China has decreased its second batch of export quota volumes for refined oil products, consultancies and trader sources said on Thursday (May 11), focusing on local demand during the refinery overhaul season and boosting domestic sales amid poor export margins.

The export volumes, comprising nine million tonnes of refined products and three million tonnes of marine fuel, were allotted primarily to state-owned refiners, according to two refining sources and consultancies Longzhong and JLC.

China Petrochemical Corp (Sinopec), China National Petroleum Corp, China National Offshore Oil Corp and Sinochem Group were the main recipients of these quotas, taking around 92 per cent of the total allocation.

Reuters has asked the four companies for comment.

In addition, private refiner Zhejiang Petrochemical Corp, a refinery subsidiary of state defence conglomerate Norinco and China National Aviation Fuel were assigned 1.01 million tonnes.

China’s Ministry of Commerce did not immediately respond to a faxed request for comment.

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The quota was less than the first batch of 18.99 million tonnes in early January, but double the allocation of 4.5 million tonnes issued around a year earlier, Reuters records showed.

The smaller export quota comes as refiners stockpile products amid strong demand expectations for petrol and diesel in the peak summer season.

China’s petrol and diesel export volumes have fallen for three consecutive months as refiners kept more cargoes for the domestic market where they are earning better profit margins, despite overall slow domestic demand growth.

While refiners have been unwilling to export because of the stronger local margins, the year-on-year increase in quotas mean that they can still choose to export should domestic demand turn weak at some point in time.

Longzhong estimated refiners could lose about 482 yuan (S$92.29) a tonne on petrol exports and 734 yuan a tonne on diesel exports in the current market.

“This year, quota holders have greater flexibility to prepare export plans and capture arbitrage opportunities,” said Energy Aspects analyst Sun Jianan.

The three million tonnes of low-sulphur fuel export quotas in this second batch was down from eight million tonnes in the first batch for this year.

However a trader from a state-owned Chinese oil company said the previous batch of low-sulphur fuel quotas had yet to be used up, as marine bunkering demand was weak in the first quarter. Reuters