China raises volumes of first batch of fuel export quotas

China has raised the volumes of its first batch of 2020 fuel export quotas by 53% from a year earlier to 27.99 million tonnes, according to a document from the Ministry of Commerce that was reviewed by Reuters.

The new quotas will be shared among five state oil companies, PetroChina, Sinopec, China National Offshore Oil Corporation, Sinochem Corporation and China National Aviation Fuel Corporation, according to the document.

The quota increases follow the addition of about 900,000 barrels per day of crude refining capacity in China last year that has caused a domestic fuel glut and spurred record exports.

In a departure from past quota announcements, the commerce ministry did not give a breakdown of exports by products, such as gasoline, diesel and jet kerosene, but instead will allow the companies to decide what products to export.

Beijing normally issues three or more batches of quotas during a year. The first batch issued for 2019 was 18.36 million tonnes, about a third of the annual total of 56 million tonnes eventually given.

Sinopec, Asia’s biggest refiner, was granted the largest quota at 13.36 million tonnes, PetroChina received 9.2 million tonnes, CNOOC was given 2.58 million tonnes, Sinochem 2.79 million tonnes and China National Aviation Fuel 60,000 tonnes.

The first round of 2020 quotas will be split into 24.55 million tonnes under the general trade category and 3.44 million tonnes under tolling arrangements, the document showed.

Companies receive a tax refund for general trade transactions once exports are completed, while taxes are waived under tolling arrangements.

In 2019, 48.15 million tonnes of quotas were given under the general trade category and 7.85 million tonnes under the tolling scheme, mostly for jet kerosene exports.

None of China’s private refiners were given export quotas in this first batch but company sources from Hengli have said the company is seeking to become the country’s first private jet fuel exporter.

China’s State Council, or cabinet, will allow qualified private companies to import crude oil and export oil products to widen market access in industries such as power, petroleum and telecommunications, state news agency Xinhua reported on Dec. 22, without saying when the change will occur.

Meanwhile, US President Donald Trump said on Tuesday that Phase 1 of trade deal with China would be signed on Jan.15 at the White House, though considerable confusion remains about the details of the agreement.

The president wrote in a tweet that he would sign the deal with “high level representatives of China” and that he would later travel to Beijing to begin talks on the next phase.

Last week, Trump said he and Chinese President Xi Jinping would host a signing ceremony to ink the Phase 1 deal.

The Phase 1 deal, struck earlier this month, is expected to reduce tariffs and boost Chinese purchases of American farm, energy and manufactured goods while addressing some disputes over intellectual property.

However, no version of the text has been made public, and Chinese officials have yet to publicly commit to key planks, such as increasing imports of U.S. goods to $200 billion, nearly doubling U.S. exports to China.

The United States launched a trade war against Beijing a year and half ago over allegations of unfair trade practices, such as theft of US intellectual property and subsidies that unfairly benefit Chinese state-owned companies.

The United States Trade Representative said the Phase 1 deal includes stronger Chinese legal protections for patents, trademarks, copyrights, including improved criminal and civil procedures to combat online infringement, pirated and counterfeit goods.

Issues such as industrial subsidies would be addressed in a later deal, U.S. authorities said.

The escalating tit-for-tat tariffs, which began in July, 2018, have roiled markets and crimped economic growth worldwide.

China’s outbound mergers and acquisitions (M&As) clocked their weakest year in a decade in 2019, as an escalated US-China trade war and tightened regulatory scrutiny of Chinese companies impacted appetite for overseas dealmaking.

Chinese acquirers announced $41 billion in outbound deals this year, nearly halving from 2018 and less than a fifth of the 2016 peak, showed data from Refinitiv. The number was only slightly higher than 2009 when dealmaking plunged after the financial crisis.

Outbound deals into the United States dropped 80% this year from last to $2 billion.

Reuters