CHINA will export diesel in August at the highest volumes since at least 1999 as its local market cannot absorb all of the fuel its refineries are pumping out and inventories are full, sources close to the matter said Tusday.

    The expected ramp-up in diesel exports from the world’s No.2 oil consumer will add to a global glut and reduce processing margins further as OPEC kingpin Saudi Arabia has already stepped up its exports of the middle distillate.

    China is expected to ship out about 900,000 tons of the industrial fuel in August, according to three sources close to the matter. That would be the highest volume since at least 1999, when Thomson Reuters first started tracking customs data.

    The increase would also overtake the current post-1999 peak of 669,831 tons of diesel exported in June, according to customs data released Tuesday.

    “The tanks (in China) have been full to the brim since May 1. It’s so much oil that they are at maximum capacity,” one of the sources said. July exports, though, are expected to be a bit cooler at a minimum of about 410,000 tons, the source said.

    China’s diesel exports have been rising as its domestic sales have been shrinking on slower economic growth and a rebound in oil prices.

    An annual ban on fishing in the South China Sea from May 16 to Aug. 1 is also driving the higher shipments of diesel from China, once a key importer of the fuel, traders said.

    A record refining throughput in June of 10.59 million barrels per day (bpd) and a rise in oil prices could also have led to the higher exports, said Barclays analyst Chi Zhang.

    The government has more than doubled the export quota volumes for diesel in the third quarter compared with the previous three months, raising total export quotas so far this year to 5.5 million tons compared with just less than 2 million tons shipped over January-June.

    Still, the diesel export run will likely not last as China does not want to be too dependent on exports, Barclays’ Zhang said. “China still seeks to be self-sufficient rather than becoming a major oil exporter. It’s still heavily dependent on crude imports,” he said.

    China is shipping the diesel mainly to Asia-Pacific, including Indonesia, Australia and the Philippines, with small volumes going to Europe and Africa, one of the sources said.

    (SD-Agencies)