China slashes first round of oil products export quotas - sources

[BEIJING] China has cut oil product export quotas to the nation's four oil majors by 40 per cent in the first round of licences for 2017, according to two sources who have seen the documents, even as traders expect allowances for overseas sales to meet or exceed this year's record levels.

The notice did not include quotas for independent refiners, known as"teapots", in line with a report by Reuters earlier this month that the government has ditched the small refiners from its export program.

In a notice dated Dec 23, the Ministry of Commerce and the General Administration of Customs said the four state majors will be allowed to sell 12.4 million tonnes of gasoline, gasoil and jet fuel abroad next year. That's down from 20.54 million tonnes in the same round this year.

Still, the cut is likely to bring little relief to the stubbornly saturated Asian oil market as China's majors did not use up the huge quotas issued at the start of last year, and have simply applied for more realistic quotas this year, traders said.

"The shrinking quota doesn't reflect shrinking demand from overseas. Instead, it reflects a shift in company exporting strategy," said a China-based trader who declined to be named, adding that companies were better matching exports to quotas.

"We expect the total quota for 2017 to be on par or a bit higher than 2016,"the trader added.

China issued allowances for a record 46.08 million tonnes of oil products in 2016, up 80 per cent from 2015. In the first 11 months of the year, it exported 43 million tonnes of oil products - including products other than gasoline, gasoil and jet fuel - up 35 per cent on a year earlier.

Traders said the next round of quotas is expected to be issued during the second quarter and will likely be higher than the first as regional fuel demand for construction and transport picks up after the winter slowdown. China usually releases three or four rounds of quotas a year.

REUTERS