Beijing’s Additional Quota on Bunker Crude to Cap the Spiralling Oil Prices at China Ports

China’s Ministry of Commerce, in the last week, issued an order stating its approval to apportion PetroChina, Sinopec, and CNOOC with an additional quota on 1 million metric tonnes of domestically produced bunker crude export for bonded bunkering at China ports this year. Moreover, the ministry has also given approval to the state-owned refinery Sinopec to use its allocated 230,000 metric tonnes of bunker fuel export quota for exporting gasoil, gasoline, and jet fuel in 2021.

China produced 9.2 million metric tonnes of bunker fuel in the January-August period. The additional quota on bunker crude makes the total export volume of bunker fuel quota reach 11.77 million metric tonnes. On the other hand, the volume of gasoil, gasoline and jet fuel falling under the export quota after the transfer of Sinopec’s quota reached 27.23 million metric tonnes in 2021, registering a considerable increase from 33.70 million metric tonnes of quota volume in the January-September period.

Bunker fuel or bunker crude is a general term for fuel oil that is used in marine vessels. Bunker fuel, obtained from the fractionation of crude oil prices, is composed of heavy hydrocarbon chains which impart it with high kinematic viscosity and flashpoint characteristics. Low sulphur fuel oil (LSFO) with 0.5% m/m sulphur content is being popularly used as a bunker fuel owing to its low environmental impact. Sinopec produces a whopping 65% of total LSFO produced in China.

As per ChemAnalyst, the allocation of quota on the export of additional volume of bonded bunker crude is expected to ease down the ongoing tightening in bunker crude supplies at China ports. The availability of higher inventories in the last quarter will be beneficial for quenching down the firm demand for bunker crude in the marine spot market. The uplifting of bunker fuel volumes shall also be responsible for caping the high oil prices at the China ports, thereby strengthening the country’s export businesses.