Sinopec has advised that it plans to reduce exports of diesel fuel in the remaining 2 months of the year by up to 70%, increase production of the fuel up to record amounts, and look to import diesel.
Why? I do not claim to know much about crude oil processing, and whether the stories we are hearing about diesel consumption could possibly have this much of an effect on supply, but what we are being told is that many small to medium sized factories have resorted to diesel generators in a bid to get around energy cutbacks.
We first noticed diesel prices rising, especially in the industrial heartlands of Guangzhou and Zhejiang and other eastern provinces, about 6 weeks ago. We were told then that it was due to the use of generators for electricity. Whether so many factory owners have purchased (or own) so many generators and are running them so much that it could create a shortage, is a question i am not qualified to answer.
Sinopec will reduce exports from 200,000t per month to as little as 40,000t. Crude oil processing in November will lift to 583,000mt per day, the equivalent of 4.26 million barrels per day.
An aside to this story – some factory owners have also elected to keep their factories closed during the day, when Government inspectors are around, only firing up at night.
Update: Beijing’s Global Times newspaper has reported lines of trucks up to 10kms long, as drivers hunt the few gas stations that have diesel stocks. The global times report attributed the shortages to the use of diesel in factory generators.