Chinese oil exports in offing as refiners ramp up output

China's oil refiners are expanding so fast that the International Energy Agency says they might boost exports to find new buyers amid the slowest growth in domestic demand since the peak of the financial crisis.

The world's second-biggest oil user will probably add more than 2.9 million barrels a day to its crude-processing capacity by 2017, against a predicted increase of 2.1 million barrels a day in consumption of refined fuels, according to the Paris-based agency. Demand will rise by 190,000 barrels a day this year, the smallest gain since at least 2009, the agency's data shows.

After developing its oil industry to fuel an economy that has tripled in five years, China faces the weakest growth since 1999. The IEA and C1 Energy, a Shanghai-based energy consultant, say the nation may become a powerhouse in fuel exports as domestic supplies exceed demand, potentially squeezing crack spreads, or the profit from processing crude. That contrasts with analysts at JBC Energy and CLSA, who say refineries will idle output until consumption recovers.

"China will become a big oil-product exporter around 2014 to 2015 as a result of its refining-capacity expansion," C1 analyst Liao Kaishun said. "This will increase supplies in the regional market then and pressure product cracks."

The premium of diesel in Singapore to Dubai crude, a benchmark grade for Asia, has averaged US$17.38 a barrel so far this year, according to data from PVM Oil Associates, a London-based broker. That compares with US$18.59 in the same period last year. The spread of naphtha to Brent crude has averaged US$98.11 a tonne this year from US$112.50 in 2011.

China Petroleum & Chemical, or Sinopec, the country's biggest refiner, completed a catalytic-cracking unit last month at its Jinling plant in Jiangsu province with an annual capacity of 3.5 million tonnes of crude. PetroChina, the second-biggest, increased the capacity of the nation's oldest refinery at Fushun in Liaoning province to 11.5 million tonnes a year, it said in August. The company also started a six million tonne-a-year crude-distillation unit at its Daqing refinery in Heilongjiang this month.