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China diesel exports seen rising to over 1 MMt in September

(Reuters) - Chinese refiners are poised to boost diesel exports in September to more than 1 MMt, drawn by lucrative margins from selling overseas and as they expect to receive more export quotas from Beijing, traders and analysts said.

The rise in Chinese exports could cap recent sharp gains in refining margins for the industrial and transport fuel and offset lower supplies from India and the Middle East, where several major refineries are due to shut for maintenance from September.

China's diesel exports are estimated to be 1.1 to 1.2 MMt next month, according to data compiled by two trading sources and China-based consultancies Longzhong and JLC.

That would be up from the 650,000 to 887,000 tons of diesel exported so far in August from Chinese ports, according to ship tracking data from Refinitiv and Kpler.

The difference between benchmark Singapore 10-ppm gasoil and Dubai crude oil, a profit margin for refiners known as the crack spread, has more than doubled in the past two months to $34 to $36 a barrel due to refinery issues in the U.S. and Europe, Refinitiv data showed.

Exports were initially expected to slow at the end of the third quarter as refiners planned to increase stockpiles before peak seasonal construction demand kicks in, but export margins have been too good to resist for sellers, said two China-based traders who declined to be named due to company policy.

Chinese diesel could sell for at least 200 yuan ($27.47) a ton more when exported compared to being sold domestically, a China-based trading analyst said.

Some Chinese refiners have sold September 10ppm sulfur diesel cargoes via spot tenders since last week at premiums of up to $1 a barrel to Singapore quotes on a free-on-board basis. That is up from mainly flat premiums for August cargoes.

The market expects Beijing to issue export quotas soon for between 9 million and 12 million tons of fuel products. The previous batch of quotas, issued in early May, were for 9 million tons.

For jet fuel, September-loading exports are estimated to be about 1.6 million tons versus, data from Longzhong and JLC showed. August exports are estimated to be 1.7 million tons.

International air travel is expected to grow in coming months after Beijing began allowing tour groups to resume travel overseas and as airlines increase capacity to meet demand, said FGE analyst Liu Xuanting. China counts the refueling of international flights as jet fuel exports.

For gasoline, September exports are forecast at around 850,000 tons, almost steady from August, as refiners reap roughly 100 yuan per ton in extra profit for selling overseas compared with domestic sales, a second China-based trading analyst said.

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