Key facts
- China's major refiners have suspended most refined fuel exports for October.
- PetroChina canceled several gasoline and jet fuel cargoes for October.
- August oil-product exports were 6.01 million tons, up 12.7% year-on-year.
- Domestic diesel and gasoil inventories are 20 million barrels below pre-war levels.
- Domestic gasoline stocks are 9 million barrels below Beijing's target.
China's decision to halt fuel exports for October is placing fresh pressure on energy markets, with Brent crude oil prices surging nearly 4% to $101.50 a barrel on Thursday. US oil prices rose 2% to $92.54.
According to Reuters, Chinese refiners are suspending exports to preserve domestic oil stocks, exacerbating an existing supply squeeze in refined products. Anindya Banerjee, head of research at Kotek Neo's currencies and commodities desk, stated that if Chinese barrels disappear from the export market, buyers elsewhere will have to compete for a smaller pool of refined products.
This export pause coincides with China, the world's largest oil refinery hub, entering a week-long holiday. For October, refiners are only authorized to ship oil products to Macau and Hong Kong. PetroChina, China's state-run oil major, has already canceled several planned jet fuel and gasoline shipments for the month.
The implications could be dire for diesel and jet fuel markets, which are already experiencing high prices. Diesel prices in the US have reached record highs, with Bank of America describing the industrial fuel's surge as a "real economy pressure point" due to its role in powering shipping and freight industries.
Banerjee noted that China is one of the few nations capable of providing relief to the global oil market. He warned that if Beijing continues to prioritize its own domestic energy security, it could lead to deeper global problems. "Even if crude periodically corrects on macro headlines, the extraordinarily tight refined-product market should continue to provide an underlying floor to oil prices until refining margins meaningfully cool," he added.