China will ship out 150,000 tonnes of diesel in December, its highest since May 2007, to retain net exporter status for a third straight month as domestic oil usage buckles in a global recession, traders said Thursday. The world's second-biggest energy user after the United States was seen exporting 100,000 tonnes this month - a reversal from record purchases made between last November and August that hit 221,000 barrels per day (bpd).
If the forecast matches customs data set to be released early next year, it will mean that China is entrenched as a net diesel exporter despite the Lunar New Year in January, a period of peak oil demand.
"Their industrial side has fallen more than they are letting on and this is flowing through to lower demand from iron ore and other commodities," said Gerard Rigby of Fuel First Consulting in Sydney. With China raising exports, the profits for churning Asian diesel from a barrel of Middle East Dubai crude oil weakened to a two-month low of $18.44 a barrel.
The crack had plunged from an all-time peak of $45 a barrel in May this year, stoked by voluminous imports as China stockpiled diesel for the Olympics. The diesel or gas oil shipments hailed from state refiners PetroChina and Sinopec Corp, with the latter seen exporting the bulk of the volumes of nearly 100,000 tonnes.
"Domestic demand is lacklustre," said a Chinese trader. Signs of worsening demand led wholesale diesel prices in China to slump to 5,330 yuan ($780.50) a tonne from 6,400 yuan ($937.20) early this month, another Chinese trader said. "China would ship out the diesel cargoes to nearby places like Vietnam, Macau and Hong Kong because seasonal demand will rise for the Lunar New Year," said a trader in Singapore.
Customs data showed China turned a net diesel exporter in October, shipping out 106,000 tonnes compared with 81,000 tonnes of imports. Like many other major economies, China is not immune from the fallout in the US banking sector. China's economy deteriorated even faster in November, the National Development and Reform Commission said on Thursday.
The country's aggressive Wednesday rate cut, by 1.08 percentage points, was the deepest since the Asian financial meltdown in 1997, as it struggles to tackle the economic crisis.
Diesel is widely used in manufacturing, transportation and power generation, and is often a measure of wider economic performance. China's gross domestic product growth is expected to slow to 8 percent in the fourth quarter of this year from a year earlier due to deteriorating external demand and weak leading domestic industries such as housing and autos. Slowing activities by Chinese mines also chewed into diesel usage. For instance, the provincial government in central Henan asked coal mines with output capacity of 300,000 tonnes or less to suspend production due to low prices.