BAKU, Azerbaijan, June 13. BMI, a Fitch Solutions company, forecasts that China will continue to be a pivotal force behind regional diesel supply expansion in 2024, fueled by the commissioning of new refineries with a combined capacity of 620,000 barrels per day (b/d), Trend reports.
If these refineries operate smoothly by late 2024, diesel output and exports from China are anticipated to increase significantly. Chinese refineries are expected to maintain higher diesel exports, supported by expanded fuel export quotas set by the government for 2024, which could further exert downward pressure on diesel prices.
In the first quarter of 2024, China exported approximately 3.7% of its total diesel production, a notable decrease from 13% in 2023. However, with the expected increase in fuel export quotas for 2024, BMI predicts a recovery in diesel exports throughout the year. Refiners in China are likely to optimize diesel production amidst sustained weakness in diesel crack spreads and prices. While domestic diesel demand in China continues to grow, the increasing adoption of natural gas in industry may temper demand for industrial diesel.
Meanwhile, India is projected to remain a net exporter of diesel in 2024 and beyond, shifting export focus from Europe to Asia due to lower import expectations from Europe. This shift could add pressure on regional supplies and prices.
The current oversupply of diesel in Asia is expected to persist, compelling refiners to consider production cuts. Since late 2023, Asia has grappled with excess diesel supply, which has dampened refining profitability. Mainland China notably expanded its refining capacities in 2023, leading to a 4.9% year-on-year growth in diesel production in the first quarter of 2024, outpacing India's 3.1% growth, as reported by JODI data.
Diesel prices in Singapore are anticipated to remain subdued due to the influx of supplies from China and India, unless there is a significant reduction in production. Although some export-oriented refiners in South Korea began reducing diesel output in March 2024, the overall impact on supply is expected to be limited, given that most refineries in Asia are configured to produce diesel.
This dynamic underscores China's pivotal role in shaping regional diesel market dynamics and the continued challenge of oversupply in the Asia-Pacific region.
Follow the author on X: @Lyaman_Zeyn