Reliance, MRPL And Other Refinery Stocks Rise Up To 5% On Reports Of China Fuel Export Suspension

Shares of Indian refinery companies gained on Thursday after reports indicated that China may suspend exports of diesel and gasoline, a development that could tighten refined fuel supply in international markets.

Reliance Industries shares rose nearly 3%, while Chennai Petroleum Corporation advanced 5.4%. Mangalore Refinery and Petrochemicals Ltd (MRPL) climbed as much as 5.72% during trading, according to stock market data.

Public sector oil marketing companies also recorded gains. Indian Oil Corporation shares rose 2.87%, Hindustan Petroleum Corporation Ltd (HPCL) gained 2.37%, and Bharat Petroleum Corporation Ltd (BPCL) moved higher by 1.37%.

The gains in refinery stocks followed a report by Bloomberg stating that China’s government has directed major oil refiners to suspend exports of diesel and gasoline as the conflict in the Middle East disrupts crude oil supply routes.

China Refiners Asked To Halt Fuel Exports

According to the Bloomberg report, officials from China’s National Development and Reform Commission, the country’s economic planning authority, met executives from major refining companies and instructed them verbally to temporarily stop exports of refined fuels.

The directive reportedly includes halting new export contracts and renegotiating or cancelling previously agreed shipments. However, this restriction does not apply in the case of jet fuel and bunker fuels that are stored in bonded facilities, or in the case of shipments that are destined for Hong Kong and Macau.

China’s largest refining companies, including PetroChina, Sinopec, CNOOC, Sinochem Group and Zhejiang Petrochemical, typically receive export quotas from the government that allow them to sell refined fuels in overseas markets.

China is one of Asia’s largest exporters of refined petroleum products. Any reduction in shipments from the country could affect supply conditions across regional fuel markets.

Refining Margins Remain Elevated

The movement in refinery stocks also coincided with strong refining margins in Asia. Singapore gross refining margins were around $27 per barrel, according to market estimates cited in the report.

Diesel processing margins were close to three-year highs at about $49 per barrel on Thursday, based on pricing data from the London Stock Exchange Group (LSEG). Jet fuel cracks were trading above $55 per barrel, indicating strong margins for refined fuel products.

Market data showed that the rally in Indian refinery stocks occurred alongside rising global energy prices and supply concerns linked to geopolitical tensions in the Middle East.

The reduction of Chinese refined fuel exports has the potential to tighten the supply balance, which has led to an increase in investor interest in refinery stocks on the Indian stock exchange during Thursday’s trading session.