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- China to cut oil product exports in May by 12.5%
- China’s rising oil demand is not yet back to pre-virus level
China’s oil market is beginning to re-balance, with product exports set to decline in May.
Refinery run rates around the world have declined as lockdowns have hit demand for road and aviation fuels. China’s refiners have however been resurgent as regulated product prices and cheap crude oil boosted margins. China’s independent refiners are operating at utilization rates above 70% compared with the normal seasonal range of 60-65%.
The recovery in demand for road and aviation fuels in China has lagged behind the increase in supply of refined products, which led to an increase in Chinese product exports, that were up 30% year-on-year in April.
A key signal that domestic demand is picking up, however, is an expected drop in exports that we estimate will be 1 million metric tons lower in May compared with April. Although we see a rebound in Chinese gasoline and diesel consumption, demand is yet to recover to pre-virus level. Road congestion levels outside of peak-hours remain depressed and 40% of scheduled flights remain grounded.
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