WRAPUP 1-China to raise Aug gasoline exports after price cut

SINGAPORE, Aug 11 - China is expected to increase August gasoline exports by a third versus July's estimates while diesel shipments were seen to rise marginally after price cuts.

The world's No. 2 energy user will ship out at least 300,000 tonnes of gasoline this month, versus estimates of below 200,000 tonnes for July, after its refiners sought to take advantage of pump price hikes in June to capture better domestic margins.

But China has since lowered retail prices of gasoline and diesel by 3 percent, the second modest cut since a similar one in January, but which still made it less attractive to stock up its production at home. [ID:nPEK204930]

Traders said the higher gasoline exports will also allow China to dispose of excess cargoes from the record refining production in July after the price hikes. But for August the top 12 refiners will trim runs as such price incentives waned. [ID:nPEK142973]

The increased shipments from China also come as regional supplies are hit by outages and improving demand. Chinese exports helped to offset lower exports elsewhere such as from Taiwan and South Korea.

"Overall, I would say that fundamentals are more or less balanced despite the high export volumes," said a Northeast Asian trader.

For example, SK Energy bought an August gasoline cargo from China's WEPEC after the top Korean refiner shut a 60,000 barrels per day (bpd) residual fluid catalytic cracking (RFCC) unit due to technical glitches two to three weeks ago.

"The unit resumed operations about two weeks ago," said another trader. Taiwan's Formosa Petrochemical Corp shut one of its 84,000 bpd gasoline-making units in early August because of an outage, affecting gasoline supplies, and sent cracks -- premiums or losses obtained from refining Brent -- to a near three-month high on Tuesday at $8.98 a barrel.

These outages came at a time when Indonesia will need some 6 million barrels of gasoline for August, up from 5 million barrels in July, as it seeks to stockpile ahead of the fasting month, which starts in the second-half of August.

Including WEPEC's spot sale to SK Energy, the Chinese export-oriented refiner has sold a total of four medium range parcels.

Sinopec <0386.HK> and PetroChina <0857.HK> are expected to offer at least a total of 180,000 tonnes of gasoline this August, traders said.

DISTILLATE SALES EDGE HIGHER

China is also expected to lift diesel exports slightly by 20,000 tonnes to 140,000 tonnes, traders said.

Refiners in China are also closely watching global demand which remains very weak with more than 72 million barrels of oil floating at sea.

"We are seeing demand still quite bad, that is clearly evident by the amount of oil which is in storage... land and sea," a Singapore based trader said.

"Offering more oil onto the spot market is not going to be beneficial for an already weak diesel market."

FUEL OIL DEMAND WEAK

China's fuel oil imports for August are expected to fall to around 1.5 million tonnes from about 2.0 million tonnes in the previous month due to wider use of liquefied natural gas (LNG) by domestic power plants.

But this downtrend has been moderated by firm demand for bunker and straight-run fuel oil.

Teapot refineries, located mainly in the northeast and account for a fifth of the country's total refining capacity, have been importing steady volumes of straight-run fuel oil to process into industrial grade diesel and low-octane gasoline.

Traders estimate that teapots -- which are restricted from importing crude as they are not state-owned -- buy at least 800,000 tonnes of straight-run fuel oil every month.

A number of Chinese utilities have been switching to LNG, which is cheaper because there is no government tax, and more environmentally friendly.

Most of China's power plants use coal for power generation, but the few that still burn fuel oil would also combine that with LNG, switching to heavier usage of the residual fuel during peak consumption periods.

"Fuel oil imports from the teapots in Guangdong and Shandong -- particularly in Shandong -- have been steady or increasing marginally. Demand is pretty healthy from month to month," said a Beijing-based fuel oil trader.

China's oil product flows (in 1,000 tonnes; refinery figures in million barrels per day): ============================================================

*AUG *JULY JUNE MAY

(volumes are in '000 tonnes) Diesel imports NA NA 266 130 Diesel exports 140 120 377 394 Gasoline imports NA NA 29 108 Gasoline exports 300 200 558 310 Kerosene imports NA 300 490 504 Fuel oil imports 1.5 1.95-2.0 2.42 2.36 Top refinery runs* 2.63 2.65 2.59 2.36 Total refinery runs** NA NA 7.16 7.34 ============================================================ *NOTE: Figures for Aug and July are from trade estimates, while June and May are from customs data. * Refinery processing rates of the top 12 refiners, as polled by Reuters. ** Refinery crude throughput as reported by the National Bureau of Statistics.