China’s diesel stockpiles fall to 10-month low

02 November 2017, Week 43, Issue 667

China’s commercial stockpiles of diesel fell to a 10-month low in September as an oversupply of fuel on the domestic market continued to ease, state-run news service Xinhua said on October 27.

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By the end of September, the country’s diesel inventories stood at 6.6 million tonnes – down 10% from August – as a pick-up in industrial activity and mining projects boosted demand for the fuel, Xinhua said. Kerosene stocks were also down 4% month on month to another 10-month low of 2.18 million tonnes.

But China’s gasoline inventory expanded in September to 7.71 million tonnes, while its commercial stockpiles of crude oil were unchanged at 29.79 million tonnes (218.36 million barrels).

The figures were released just days before Beijing unveiled its latest offensive against polluting fuels such as diesel, announcing that it would forbid from November 1 the sale of diesel with sulphur content higher than 10 parts per million (ppm). This kind of diesel is typically used by tractors and ships.

The move could encourage Chinese oil refiners to ship more of the diesel they produce overseas in the coming months.

“Companies may have extra high-sulphur diesel to sell as they replace storage tanks with cleaner fuel,” an unnamed fuel marketing manager with PetroChina told Reuters.

The Shanxi provincial government also unveiled a plan on October 31 under which the region’s local governments and companies will be ordered to ensure adequate coal, gas and oil product supplies ahead of the peak winter consumption period.

Specifically, the Shanxi branches of PetroChina and Sinopec have been told to increase their monitoring of the market and to maintain “reasonable inventory levels,” especially of winter diesel fuel in colder areas. The orders come at a time when fears grow that parts of China may face fuel shortages this winter.

It is particularly unusual, however, for coal-rich Shanxi, which accounts for just under a quarter of China’s total coal output. The series of demands issued by its regional government included a demand that localities ensure they have three days’ worth of emergency gas supplies and that production at most efficient coal mines be increased if needed.

While Beijing’s long-running campaign to replace coal with gas has triggered a surge in demand for the latter, supply has struggled to keep up with demand, partly owing to insufficient infrastructure such as storage facilities.

Edited by

Andrew Kemp

Editor

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