China’s Ministry of Commerce has announced the second batch of export quotas for clean oil products and low sulfur fuel oil (LSFO) for 2025, totaling 18 million metric tons. This allocation includes 12.8 million metric tons for gasoline, gasoil, and jet fuel, while the remaining 5.2 million metric tons are designated for LSFO.
The overall quota is consistent with the previous batch issued in May 2024. Notably, this new allocation increases the LSFO quotas for 2025 to 13.2 million metric tons across the first two batches, representing a 10% year-on-year increase.
The rise in export quotas for LSFO is significant, as it permits the use of these quotas for marine gasoil exports due to a change in HS Code starting January 1, 2025. The new HS Code combines marine gasoil with LSFO, thereby requiring quotas for both products.
Analysts estimate that about 100,000 metric tons of marine gasoil can be exported monthly, equating to an annual total of 1.2 million metric tons. Despite this expansion, concerns remain regarding the export margins for LSFO, which a Beijing-based analyst notes are not favorable, posing challenges to maintaining higher export volumes in the coming months.
In early 2025, China’s exports of gasoline, gasoil, and jet fuel dipped to 4.08 million metric tons, a decrease of 27.4% from the previous year. Currently, both gasoil and gasoline export margins are negative, leading to cautious export strategies among producers.
However, recent rises in crude prices may improve these conditions, potentially influencing more substantial exports in the upcoming months. Jet fuel, which remains the most viable product for export, is less influenced by new tax regulations and is expected to see increased exports as well.
Lastly, the processing trade quotas for oil products were reduced to 4 million metric tons, a 33% decline from the initial batch of 2025. Despite this, the total processing trade quotas have reached 9.95 million metric tons, marking a 116% increase compared to the first two batches of 2024.
This adjustment reflects the need for quota holders to optimize export costs in light of new VAT regulations.