Amid strong demand for diesel exports Chinese refiners increases its production  

China’s refined oil product exports in November are set to hit the highest since April 2020 as refiners ramp up output to multi-month highs to boost diesel supply and profit, offsetting the impact of slower domestic demand from COVID-19 restrictions.

The world’s top two refiners – the United States and China – are processing more crude to meet higher diesel use globally this winter as countries switch to oil for heating, away from more expensive natural gas. The increased output could also cool prices for other oil products, especially for gasoline, and dampen overall refining margins.

China’s crude oil throughput could rise by up to 500,000 barrels per day (bpd), or 4% this month over October, as two new refineries – PetroChina Guangdong Petrochemical and private firm Shenghong Petrochemical – prepare to start operations.

Half of the increase, though, will still come from Asia’s biggest refiner Sinopec 600028.SS, one of them said, as it raises output to produce more diesel and raise fuel exports.

Sinopec’s major coastal plants are expected to raise throughput moderately or extend high operation rates from October, with production geared towards diesel at the expense of gasoline.

Further boosting supply, China’s largest private refiner Zhejiang Petroleum and Chemical Co (ZPC) is raising diesel output by cutting petrochemical production.

With the rise in production, exports of diesel, gasoline and aviation fuel may top 6 million tonnes in November, highest since the early days of COVID-19 in April 2020, according to estimates by analysts and China-based industry sources.

Diesel exports may reach 1.8 million to 2.2 million tonnes for the month, highest since June 2021, according to estimates by Wood Mackenzie, JLC and Refinitiv, as refiners are lured by gasoil, or diesel, refining profits that have more than tripled in Asia this year.

Chinese shipments are mostly destined for Southeast Asia in October and November, data from Refinitiv and Kpler showed, as the arbitrage window – which determines if a commodity can be shipped from one geographic region to another at a profit – to the West is closed.

Gasoline exports could rise to as much as 2 million tonnes – a level last seen two years ago – as overseas sales are still more lucrative compared to the local market.