Compared to 2022, total refinery output during January and February grew by 3.1 million tonnes. Kerosene and diesel oil output led growth and grew by respectively 26% y/y and 15% y/y. Compared to December 2022, average monthly output was down 3%.
Since COVID restrictions were rolled back in December 2022, transportation activity in China has rebounded quickly. According to Fitch Ratings, urban traffic has recovered to pre-pandemic levels after the Chinese New Year holiday and the International Energy Agency (IEA) believes domestic flight activity has also exceeded pre-pandemic levels. Despite recovering quickly, international flights, however, remain below normal.
Despite the increase in domestic demand, exports of refined products grew faster than overall refinery output. Refineries have taken advantage of the larger export quotas that have been available since October, and total January and February exports grew 74% y/y.
During the first ten months of 2022, the Chinese commerce ministry kept export quotas low as they focused on securing domestic supply and containing prices. Exports therefore averaged only 4.0 million tonnes per month and fell 25% y/y. Since then, exports have averaged 6.6 million tonnes and equalled 11% of refinery output, up from 7% during the first nine months of 2022.
Shipping has naturally benefitted and according to data from Signal Ocean, Chinese exports contributed on average 80% more tonne miles to the clean tanker trade from November 2022 through February 2023 than during the first nine months of 2022.
China will be key to the tanker shipping markets during the rest of 2023. In fact, the IEA expects that China will drive world oil demand to record levels during the 2nd half of the year.
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