China may cut fuel exports in October as inventories hit seven-year low

China's fuel exports may be reduced in October, potentially tightening the global fuel market, as domestic gasoline and diesel inventories have fallen to a seven-year low, according to GL Consulting. In August, China's fuel exports recovered to 6.01 million tons, a 12.7% increase from the previous year, following the removal of export restrictions in mid-July. Jet fuel exports reached an all-time high during this period.

However, GL Consulting noted that October exports could be lower due to the critically low domestic inventories. The consultancy suggested that with constrained domestic supply and strengthening demand, refiners are likely to prioritize the domestic market, effectively redirecting barrels that would otherwise have been shipped overseas. This situation is expected to keep Chinese fuel inventories tight through the end of October.

The tight inventory situation is attributed to strong export flows in July-September drawing barrels out of the domestic market, while peak summer travel boosted gasoline demand and autumn harvesting supported diesel consumption. GL Consulting emphasized that the situation is a supply-demand balance issue, with refinery availability and export flows determining the duration of the tightness.

Reduced fuel exports from China could exacerbate the global fuel crunch, which is already impacted by constraints in the Middle East and Russia, leading to record-high refining margins and retail fuel prices in various markets, including the United States.