China’s gasoline and diesel inventories have dropped to their lowest levels in more than a decade, raising the possibility that Beijing may impose stricter limits on fuel exports in October.
Commercial gasoline inventories have reached their lowest level since 2011, while diesel stocks are at their lowest point since 2015, according to data from GL Consulting.
China does not publicly disclose its fuel inventory figures. GL Consulting’s data, which dates back to 2011, is supplied by Mysteel, a major provider of commodity information.
The inventory decline has occurred as fuel exports have risen and domestic demand has recovered seasonally. Rystad Energy said the low stock levels appear to have heightened concerns in Beijing and could prompt the government to impose tighter export controls.
GL Consulting expects Chinese fuel exports to fall in October as state-owned refiners put greater priority on ensuring sufficient supplies for the domestic market.
China has already cut refinery throughput by 7% this year. Refiners have also dealt with supply disruptions following fuel-export restrictions introduced by Beijing in mid-March.
The restrictions began to ease in mid-July, allowing exports to rebound. Shipments returned to prewar levels in August and were expected to remain strong through September. Increased exports have boosted refinery profits and encouraged higher processing rates.
However, China has yet to announce its fuel-export plan for October, leaving traders and refiners uncertain about the amount of fuel that will be permitted to leave the country.
The inventory decline comes as Middle Eastern energy supplies face disruptions. Several analysts have lowered their forecasts for China’s crude-oil imports in the fourth quarter as a result, while also questioning whether current refinery operating rates can be sustained.
Energy Aspects has cut its forecast for China’s fourth-quarter crude imports to 9.2 million barrels per day. Rystad Energy has also reduced its projection for fourth-quarter refinery throughput by 880,000 barrels per day, bringing the estimate to 13.9 million barrels per day.
Rising crude costs are adding pressure on independent refiners, while state-owned refiners are entering their seasonal maintenance period.
Ye Lin, vice president at Rystad Energy, said refiners have limited flexibility because elevated crude costs are already forcing some independent plants to reduce operations.
China faces a balancing act between taking advantage of profitable fuel exports and protecting domestic energy supplies. Stricter export controls could help preserve local inventories, but they would also limit refiners’ ability to capitalize on favorable export margins.
As a result, energy traders will be closely watching China’s October export policy, with the country’s decisions potentially affecting regional fuel supplies and international petroleum markets.
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