China has allocated 19.33 million mt of oil product export quotas under the general trade route to the country's five state-owned oil companies -- CNPC, Sinopec, CNOOC, Sinochem and China National Aviation Fuel, market sources said late Sunday.
The new allocations bring the total oil product quotas allocated, comprising the processing trade route and the general trade route, to 39.33 million mt to date this year, equating to 96% of the actual products outflow volume in 2017 and 91.5% of the total quotas allocated last year.
This is the second round of allocations for oil products export this year.
Market sources expected additional quotas for gasoil and jet fuel would be released under the processing trade route soon.
This is because export demand for both products is estimated to be strong in 2018, while the year-to-date quota allocations are below those for the full 2017 year. In contrast, gasoline quotas issued to date this year are 6% higher than the 2017 quota.
Moreover, "the barrels exported from bonded storage, which for refueling airplanes or vessels for international voyage, are required to be exported under the processing trade route," said a Beijing-based trader.
Beijing issued 120,000 mt of export quota for gasoil under the processing trade route in the first round, and 3.56 million mt for jet fuel.
Market sources said it was possible there would be only two quota allocation rounds this year, with the total volume similar to that for the whole of last year.
On the top of the quotas for the three key products gasoline, gasoil and jet fuel, Beijing also allocated 5,000 mt of LNG export quota to Sinochem.
In the first round allocation, CNOOC was awarded 70,000 mt of LNG quota.
Independent refiners were not in the list of the quota recipients.
China allows oil product exports via two routes -- the processing trade route and the general trade route -- and issues separate quotas for each.
Under the processing trade route, there are no applicable taxes on the product, but almost no flexibility to the exporter. The exported product has to have been refined from imported crude oil, must come from a specific refinery that has been allocated an export quota, and the seller of the crude oil must be the buyer of the oil product, although it can resell it to others.
Under the general trade route, state-owned trading companies are free to export oil products from the domestic market, regardless of whether they have been produced from domestic or imported crude oil.
