China removes fuel export restrictions for July.

China has removed its restrictions on refined fuel exports for the remainder of July and has allowed a private refinery to restart shipments after a four-month pause, according to trade sources on Wednesday. This move comes as the world's largest refiner returns to normalcy after disruptions caused by the Iran conflict.

The restart of refined fuel exports from one of Asia’s major suppliers follows an interim peace agreement between the U.S. and Iran. This is expected to alleviate transportation fuel prices in a region where consumers have been dealing with inflation since Beijing limited shipments to ensure domestic supplies in March.

This decision may also prompt state-owned refiners to ramp up production to take advantage of favorable export margins, which could bolster oil shipments to China, the leading global importer. Zhejiang Petrochemical Co, primarily owned by Rongsheng Petrochemical, has been cleared to export fuel in July after over three months of halted exports, as indicated by four sources familiar with the situation. China’s Ministry of Commerce and the National Development Reform Commission did not respond immediately to requests for comments, and Rongsheng also did not provide an immediate reply. The sources chose to remain anonymous due to their lack of authorization to speak to the press.

In recent months, only state-owned enterprises were allowed to export gasoline, diesel, and jet fuel, and they had to apply for export volumes monthly. Refineries are projected to export about 3 million metric tons of these fuels this month, including bonded exports to Hong Kong and Macau, as reported by two other sources, which aligns with last year's average export figures. However, the scheduling of these shipments is still in progress and should be finalized by the end of this week.

Initially, exports were projected to reach nearly 2 million tons in July, as reported by Reuters. It remains uncertain whether the relaxation of export restrictions will continue into August, noted two of the sources.

The interim agreement between the U.S. and Iran has already led to an increase in oil exports from the Middle East, putting downward pressure on global prices and alleviating supply concerns. However, recent attacks have unsettled the markets again, causing prices to rise.

For July, China's gasoline exports are expected to exceed 400,000 metric tons, significantly higher than the preliminary estimate of just below 40,000 tons, according to one source. Meanwhile, diesel exports could reach between 600,000 and 700,000 tons, increasing from around 200,000 tons previously, while jet fuel exports might rise to approximately 1.9 million tons from 1.5 million tons earlier, according to a second source.

Export margins for Chinese refiners remain attractive, hovering around 1,000 yuan per ton ($147.10) or more this week, according to two additional trade sources. Analysts at FGE NexantECA predict that refiners will likely seek to utilize their remaining quotas as export restrictions ease, with gasoline exports expected to see more growth than diesel later this year due to increasing pressure on domestic demand from the rising adoption of electric vehicles.