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Russell Russell: China can help Asia's diesel market, which is tightening up.

China could help ease the tight diesel market in Asia in December by increasing exports to compensate for reduced shipments from Indian refiners due to sanctions on Russian crude oil.

According to trading sources the exports of China's diesel could reach 4.5 million barrels by December as refiners make use of high margins to produce this transport fuel.

If the December loading cargoes rise to the level expected, this would be the best month since August. It is also a big jump from the forecast of commodity analysts Kpler that November exports will total 2.76 million barrels.

China has the second largest oil refinery capacity in the World, but it uses less than 80% at the major state-owned facilities, and even less for smaller independent processors.

Exports are also regulated by government quotas. These are primarily based on ensuring the domestic security of fuel, rather than market forces which allow refiners a higher profit margin when margins increase.

China's refiners may still have enough quotas to increase December exports for diesel, jet fuel and other middle-distillate fuels.

China has issued quotas for 8,395 millions metric tons of diesel, jet fuel, and gasoline. This brings the total amount for the year up to 40,195 million tons. That's about the same as 41.0 million for 2024.

According to data released by the government on November 18, refiners exported 29,91 million tons of these three fuels during the first 10 month of the year.

The quotas are available for exports of about 10,29 million tonnes of each of the three fuels in November and December.

Kpler predicts that November exports for the three products will be approximately 1.58 million tonnes. While this number may increase as more cargoes arrive at the end of the calendar month, it's clear that refiners have enough remaining quotas available to boost December exports.

MARGINS ROBUST FOR FUEL

The refining margins of diesel and gasoline are at their highest levels in two years.

Singapore's profit from making a barrel gasoil (the building block of diesel) ended Monday at $24.37, down from the previous close of $25.97, as traders factored in the possibility that Chinese exports could increase next month.

The spread reached $31.25 per barrel on 19 November, the highest level since 23 September and up 140% from the lowest point in 2025 at $13.05 on 25 March.

Profit margins on a barrel gasoline On Monday, the price was $14.54, up from $14.42.

The price of a barrel had risen to $17.71 on November 14. This was the highest level since August 29, 2023. It is also almost five times higher than the lowest point in 2025, which was $3.68 a barrel.

The recent improvement in the refining margins is partly due to the weakening of exports to India. According to Kpler, shipments of jet fuel, diesel and gasoline to the South Asian country are expected to fall to 4,34 million tons by November. This will be the lowest level since April, and the lowest so far for 2025, which was 5.54 million tonnes in September.

In India, several refiners have been forced to look for alternative crudes in order to replace the Russian oil they were buying at a discount before the latest U.S. sanction on Russian oil companies.

India's refiners are likely to find alternative crude oil supplies, so the decline in refined product exports is only likely to be a temporary phenomenon.

While there may be a market gap, China appears to be the best placed country to benefit from additional gasoline and diesel.

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These are the views of the columnist, an author for.

(source: Reuters)