China’s July diesel exports hit five year low amid weak demand overseas

China’s diesel exports fell for a fourth straight month in July hitting their lowest level in five years, as tepid demand overseas due to the COVID-19 pandemic forced Chinese refiners to focus on domestic consumers.

China shipped out only 550,000 tons of diesel, about half of 1.04 million tons in June and a third of 1.58 million tons in July 2019, data from the General Administration of Customs showed on Sunday night.

Gasoline exports were down 28% from a year earlier at 1.12 million tons last month, while jet kerosene exports were down 77% to 320,000 tons.

Analysts expect diesel demand in China, the world’s second-largest oil consumer, to hit a record this year powered by trucking activity.

Profit margins for diesel production had been higher than for gasoline this year until recent weeks, as industrial activity had been recovering faster than domestic travel with the easing of China’s coronavirus outbreak.

Still, the historically high crude throughput is weighing on fuel inventory and refining profits.

Diesel margins were around 86 yuan ($12.43) a tonne and gasoline 92 yuan a tonne as of mid-August, analysts reckon, down from around 900 yuan a tonne in May.

“State-backed refineries are seeing high stockpiles, while teapots are slashing sales prices and cutting fuel prices to reduce inventory,” said Ding Xu, an analyst at Longzhong consultancy.

Analysts at JLC consultancy expect China’s diesel and gasoline exports to reach 1.56 million tons and 1.37 million tons, respectively, in August.

Customs data also shows that China’s July liquefied natural gas (LNG) imports were 5.03 million tons, up 3% from the same month last year.