China, India Q4 Gasoil Exports Seen to Surge 47% on Year to 2 mil-2.5 mil mt

Asia's two largest economies, China and India, could see combined gasoil exports surge 33-47% or 2 million-2.5 million mt year on year in the fourth quarter, up from 1.5 million-1.7 million mt in Q4 2011, amid a gloomy global economic outlook and increased refining capacity, traders said.

Indian refiners are expected to produce surplus gasoil and the bulk of regional exports in the quarter amid waning domestic demand and increased production, traders said.

India's Mangalore Refinery and Petrochemicals Ltd., will export an average 120,000 mt/month of high sulfur gasoil over October-December. Late last week, the refiner issued its fourth tender to sell spot high sulfur gasoil sell tender for loading in November, equating to 160,000 mt in that month alone.

In contrast, MRPL sold or offered a total 170,000 mt of high sulfur gasoil for loading over October-December 2011, Platts data showed.

Privately owned Essar refinery has sold up to 170,0000 mt of spot 500 ppm sulfur gasoil for November. It has been increasing spot gasoil exports since H2 September, after being absent from the spot gasoil market since 2010, amid slowing domestic demand and a refinery expansion earlier this year.

Private refiner Reliance is likely to export 1 million mt/month of gasoil in Q4, or up to 1.5 million mt/month if domestic demand remains sluggish, traders said.

"Reliance runs two large refineries and can easily export between 800,000 to 1.2 million mt/month of gasoil, but when domestic demand is slower, that figure can go up to 1.3-1.5 million mt/month," a source said.

Reliance and Essar stepped up their combined refined product exports in August for the second month in a row, to around 4.45 million mt, or about 1.13 million b/d, Platts reported earlier.

Gasoil forms the bulk of refined products exports from India.

Essar's refining capacity stands at 400,000 b/d, up from 360,000 b/d before the latest expansion, while Reliance has a nameplate capacity of 1.24 million b/d at its Jamnagar complex. Jamnagar has two refineries, including a 580,000 b/d plant in a Special Economic Zone that is fully export-oriented.

CHINA Q4 EXPORTS TO HIT 300,000 MT/MONTH

China could see massive spike in gasoil exports in Q4 amid steady refining run rates and slower demand in the county, traders said. Surplus coal stocks could also minimize gasoil demand as a utility feedstock.

Main traders Petrochina and Unipec could see their gasoil exports hit or even surpass 300,000 mt/month in Q4, compared with 107,000 mt/month a year earlier, traders said.

"What I'm hearing is that for Q4, China should be a regular exporter due to high inventory volumes," a Singapore-based trader said.

China's refinery run rates have remained resilient amid a fall in domestic demand in recent months, and capacity expansions expected in Q4 will boost overall refinery runs further. Barclays' Research expects over 700,000 b/d of new refinery capacity to be added in the current quarter.

"Domestic gasoil demand will be stronger because of higher seasonal demand, but with the higher throughput in the fourth quarter, we'll definitely see more gasoil exports, especially since economic growth has not fully recovered," said a products marketer in Beijing.

The country's refinery throughput in September stood at 38.76 million mt, up 2.7% from August and up 7% year on year. For the first nine months of 2012, crude throughput stood at 340.28 million mt, up 2% year on year.

China exported around 500,000 mt of gasoil in Q3, surging from 340,000 mt in Q2, amid weaker demand due to slower economic growth.

Domestic gasoil demand over June to August contracted by an average 1.8% year on year, or 3.3 million b/d, Platts calculations showed.