China likely to experience refining overcapacity by 2015

China’s domestic market has been showing a weaker demand for oil since entering the fourth quarter compared with the same period last year, a trend which could lead to increased diesel oil exports in the last three months of this year. According to Liao Kaishun, an analyst with market research firm ICIS C1, diesel oil exports from China could amount to 300,000-400,000 tons in October, compared with 132,400 tons a year earlier.
Oil exports could also be largely affected by its profitability, aside from supply-demand factors, which is what occurred from October 1-18, when diesel oil’s export price reached CNY192 (US$30.71)/ton. The price was higher than its domestic wholesale price, while gasoline’s export price was CNY122 (US$ 19.51)/ton, which was lower than wholesale prices. The higher export price made the exportation of diesel oil more attractive during the period, according to preliminary calculations made by Shanghai Toprise Information and Technology Co. Ltd.
Experts say the growth of oil exports will not be significant, as oil firms could avoid severe overcapacity and over-supply by adjusting utilization rate and output. Industry experts also say that an increase in oil exports will not necessarily guarantee high profits since the crude oil used for refining largely depends on imports and the prices of these fluctuate. (October 29, 2012)