Mideast Gulf to China VLCC (TD3C) climbed from $24,373/day on 7 November to $37,616/day on 19 November, its highest level since 9 October but had fallen back to $32,721/day on 21 November. Chinese crude oil imports were below 2023’s level every month this year from February to October, according to Vortexa data. Since June, TD3C has been rangebound between $20,000/day and $40,000/day. November arrivals of crude oil to China shows signs of picking up, rising so far from 11.25mn b/d in October to 12.6m b/d in November, but much of the additional imports have likely gone into storage as refinery throughput remains low. Additionally, lacklustre refining margins may have prompted Chinese refiners to cut back purchases of December-loading Mideast Gulf and Atlantic basin crude, preferring cheaper Iranian and Russian barrels that moves mostly on shadow tonnage. Private sector Chinese refiners, the biggest buyers of Russian and Iranian oil, recently received around 3.8-4m t of fresh crude import quotas to be used before the year ends, giving them room to lift imports.
US Gulf to Mediterranean Aframax (TD25) rose from $19,536/day on 14 November to $30,685/day on 18 November. Although it ticked down again, ending 21 November at $27,559/day. UKC to USAC MR (TC2_37) rose from $2,034/day on 8 November, its lowest level since March 2022, to $10,794/day on 21 November. The end of refinery maintenance in Europe has lifted November gasoline flows after a slow October but weak refining margins will likely limit the upside during the remainder of the fourth quarter.
China’s export tax rebate cut from 13% to 9% for products, cancelled for UCO
China will cut export tax rebates on oil products including gasoline, jet fuel and diesel from 13pc to 9pc, effective 1 December. China cancelled the tax rebate for exports of chemically modified animal, plant, or microbial oils and fats, including used cooking oil (UCO).
Export margins and volumes could fall because of the change but refiners may have little flexibility to reduce refined product exports if China's domestic demand remains low. China is a significant exporter of transport fuels, but the government strictly regulates export levels through a quota system. A shortage of quotas and unfavourable export economics sent China's total oil product exports to an 18-month low in October, the latest customs data show.
"This is going to hit (refined fuel) export margins," a state oil official said, estimating margins would fall by 200-300 yuan ($27.62-$41.43) per ton. Citi analyst Oscar Yee said in a note that the tax change will reduce revenues for state refiners Sinopec and PetroChina and should cap fuel exports from China, which could support refiners' margins elsewhere in Asia, Reuters reported.
An increase in prompt vessel requirements as some Chinese refiners brought forward some oil product loading dates to avoid the rebate reduction may have helped to briefly buoy regional MR rates. South Korea to Singapore MR freight rose from $534k on 15 November to $695k on 20 November, although since fell back to $674k on 22 November.
The recent change comes against backdrop of growing concern about slowing growth in the Chinese economy and in the country’s oil demand. The Chinese government announced stimulus measures in October and November, but most China watchers doubted it would have much impact on economic or oil demand growth. Chinese stocks continued to slump on Friday because of disappointing tech company earnings and concerns over Trump’s return to the White House.
"For December-loading UCO, export shipments could be delayed or cancelled due to the policy change as parties will seek to renegotiate contracts," Ye Bin, chairman of Chinese UCO exporter Sichuan Jinshang, told Reuters.
China has exported around 15k b/d of UCO this year, around half of total global UCO exports, according to Vortexa. Just over three-quarters was lifted by MRs and specialised tankers made up most of the rest.
Export tax rebates refer to refunds of the VAT and consumption tax paid by the exporter on exported goods during the production and circulation process. In previous economic crises, export VAT rebates have been a key tool in supporting Chinese exporters. In 2018 and 2019, during Trump’s last term, China repeatedly raised exports VAT rebates for a wide range of products in a bid to boost prospects for shipments amid its trade war with the United States.