China may reduce its fuel exports in October as domestic gasoline and diesel inventories have reached their lowest levels in several years. According to reports, China's fuel exports in August reached 6.01 million tons, reflecting a 12.7 percent increase compared to last year. This increase in exports occurred after Beijing lifted fuel export restrictions in mid-July, when tensions in the Strait of Hormuz were at their peak.
Increase in Exports in Recent Months
The total volume of China's fuel exports last month exceeded pre-war levels, and jet fuel exports reached their highest historical level. It is also expected that foreign exports will remain strong in September. However, given the decline in gasoline and diesel inventories to their lowest levels in seven years, October exports may decrease. GL Consulting, which is owned by MySteel, announced this week that China has not yet announced its fuel export plans for October.
Impacts on Domestic and Global Markets
As domestic supply is currently relatively limited and domestic demand is strengthening, it seems that refiners will prioritize the domestic market. This could lead to a reduction in the export of refined products in the short term, with cargoes that would otherwise be sent abroad redirected to meet domestic balance.
According to analysts, China's fuel inventories are currently limited and are likely to remain so until the end of October. This situation is supported by the recent increase in fuel exports and strong domestic demand. On the other hand, fuel exports from China surged significantly from July to September, removing additional cargoes from the domestic market. Meanwhile, summer travel has supported peak domestic gasoline demand, and autumn harvests and inventory replenishments before the traditional peaks in September and October have also boosted diesel consumption.
GL Consulting emphasizes that this issue is not just a story of inventories but a story of supply and demand balance, and the availability of refineries and export flows will likely determine how long this bottleneck will last. A reduction in fuel exports from China could exacerbate the global fuel crisis caused by restrictions in the Middle East and Russia. This situation has led to increased refining margins and retail fuel prices reaching record levels in many markets, including the United States.
