China’s net oil products exports tumbled to a seven-month low amid speculation refiners chose to sell more fuel at home after the government stopped cutting domestic prices amid crude’s crash. Net product exports—a measure that strips out imports—fell 76 percent in January from the previous month to 350,000 metric tons, the lowest since June, according to calculations based on General Administration of Customs data released Monday. Gross fuel exports dropped 30 percent month-on-month, faster than the 7 percent slide in imports. The sudden slowdown in exports comes after the government’s decision to stop lowering fuel prices when crude trades below $40 a barrel, supporting gasoline and diesel above levels where they would be trading internationally. The shift may ease pressure on Asian refining margins after the record amount of diesel, kerosene and gasoline China shipped abroad last year. Brent oil, the global benchmark, has fallen 12 percent this year and was trading at $33 a barrel at 9:01 a.m. in London. “The price spread between exports and domestic retail sales fell to zero in December and have been negative since the government stopped adjusting fuel prices lower,” Lin Jiaxin, a Guangzhou-based analyst with ICIS-China, said by phone. “As long as crude oil prices are subdued, refiners lack the economic incentive to export.”

Export Quotas

The decline in net exports was also partly due to cold weather last month boosting domestic demand, analysts at Citigroup Inc. including Ivan Szpakowski said in an e-mailed report on Monday. The bank expects oil product exports to rise after the Chinese New Year as regulations for independent refiners ease, leading to higher operating rates. China awarded a combined 330,000 tons of fuel export quotas to four independent refiners, known as teapots, for the first quarter, and they are required to use at least 60 percent of the quota, according to Lin. Exports may rebound this month and next as they utilize their quotas, Lin said. The country’s commerce ministry has issued more than 1.8 million barrels a day of export quotas for the first quarter, more than double in the same period last year, analysts at Barclays Plc including Miswin Mahesh said in a report Feb. 5. The nation exported more products than it imported for the first time last year after crude purchases increased to a record as the world’s second-biggest oil consumer sought to fill its strategic oil reserve and the government allowed teapots to buy foreign supplies.