OREANDA-NEWS. November 20, 2013. The price of finished oil, especially diesel, in Far East is expected to drop largely in the last two months of this year due to sharply increased export quota of the top two Chinese oil and gas producers.

People in the know disclosed in an interview on November 5 that China Petrochemical Corp. (Sinopec Group), the parent of China Petroleum & Chemical Corp. (Sinopec, SHSE: 600028, SEHK: 0386, and NYSE: SNP), and China National Petroleum Corp. (CNPC), the parent of PetroChina Co., Ltd. (shse:601857 and SEHK), each gained a finished oil export quota for the fourth quarter of this year in October and the quotas stood at 3.5 million tons, up 320 percent from a quarter ago, and two million tons, respectively. They should exhaust the quota in the last two months of this year and under such an environment, the price of finished oil, especially diesel, in Far Eastern markets including South Korea and Singapore would drop largely undoubtedly.

He reiterated that Sinopec Group once was censured by oil refiners in Far East because it suddenly raised the export of diesel in the first quarter of this year and an oversupply rooted from this directly caused the price of diesel in the region fall largely. And due to this, those refiners suffered a huge loss. China slashed finished oil export quota of both it and CNPC over the following two quarters after taking rising demand in the domestic market into consideration, but raised the quota for the fourth quarter of the year largely again.

An analyst pointed out that an absolute monopoly in the Chinese oil industry was expected to be broken up after the Third Session of the Eighteenth Central Committee of the CPC and by then, qualified private firms would be allowed to enter the field of oil exploitation, refining and distribution. Under such an environment, the nation would see its refining capacity rise largely and more diesel would be exported as a result. Many industry observers believed that China would become a major finished oil production base for Far East, or even the Asia-Pacific region, during 2020 to 2030.

C1 Energy forecasts that provided that everything goes on well, China will see its annual export capacity of petrol rise to eight to 10 million tons by 2015, accounting for about 10 percent of the total and compared to about five million tons currently. That of diesel will exceed 15 million tons per year, accounting for seven percent of the total.