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China’s oil product exports soar in H1 2016

The country’s crude demand may be slowing but sales are ramping up

China's oil products exports increased by 30% in the first half of this year, buoyed by higher government quotas, slowing domestic demand and record-breaking shipments in June.

Between January and June, China exported 170.85m barrels (22.2m tonnes) of oil products, according to data released by the Joint Oil Data Initiative.

That's 51.1m barrels higher than in the first half of 2015 - a rise of around 30%.

Export volumes in June reached a record 33.38m barrels, with flows averaging 1.11m barrels a day. That is China's highest-ever daily export level and an increase of 242,460 b/d from June 2015.

Across the entire month of June, exports were almost 7.3m barrels higher than a year earlier - a rise of around 22%.

Throughout the January to June period this year, average daily exports were 279,000 b/d higher than in the same period last year, reaching 0.939m b/d.

Chinese gasoline exports in particular have soared as the country's demand for the road fuel has slowed.

In the first half of this year, gasoline exports were 43% higher than a year earlier, reaching 37.87m barrels.

Gasoline shipments in June surged 55% higher, than a year earlier, reaching 5.1m barrels (311,770 b/d).

Chinese independent refineries, known as teapots, have been expanding the sector and aggressively entering international oil product export markets.

After Beijing lifted restrictions last year, which barred private firms from importing oil directly, the teapots began buying up cheap crude to meet import quotas.

The teapots have also been granted a series of export quotas, totaling 41.54m tonnes (350m barrels) this year, according to Energy Aspects - a consultancy. This is around 23m tonnes (194.4m barrels) higher than in 2015.

Energy Aspects says the more than doubling of this year's export quota reflects a domestic glut of oil products caused by higher refinery processing rates while demand growth has slowed.

Chinese refinery runs also reached a record 11m b/d in June, according to the International Energy Agency (IEA).

Q2 throughput was 200,000b/d higher than the previous quarter, averaging 10.8m/d.

Domestic crude production averaged 4.08m b/d in June - around 375,000 b/d lower than a year earlier.

Meanwhile, China's domestic demand for oil products is slowing. In Q1 this year, India overtook China as the largest incremental oil consumer in the world.

In June, Chinese oil demand edged just 75,000 b/d higher than levels a year earlier, (a rise of 0.6%) reaching 11.5m b/d.

The IEA expects China's refined product demand to increase by just 1.7% this year, reaching 11.64m b/d. This is down from average annual growth rates of around 5% over the past decade.

Fuel oil consumption will fall by 42% this year, down to just 186,000 b/d, according to the IEA. Next year demand for the fuel will fall by a further 27%, the agency says, down to just 136,000 b/d.

The country's gasoline demand growth has also slowed, rising by just 0.1% year-on-year in June. That's down from average increases of around 5.4% in Q4 2015 and 4.8% in Q1 this year. This year gasoline demand is expected to average 2.6m b/d. This is around 60,000 b/d - 2.4% - higher than last year.

Slowing GDP growth and flat demand from the power sector are curbing the country's oil product demand.

Chinese electricity demand growth is expected to average just 2% each year between 2017 and 2020, according to Bank of America Merrill Lynch. This is down from growth of around 7% per year between 2012 and 2013.

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